Ground-up construction offers investors complete control over location, design, and cash flow potential. But financing a new build—especially as a real estate investor or developer—can be complex, slow, and full of income verification hurdles.
That’s where DSCR loans for ground-up construction projects step in.
With a DSCR loan, you can finance construction based on future rental income, not your personal W2s, tax returns, or employment history. Whether you’re developing single-family rentals, duplexes, or commercial income-producing properties, DSCR construction loans let you build your portfolio from the ground up—literally.
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A Debt Service Coverage Ratio (DSCR) construction loan provides funding for ground-up investment property development. It’s designed for real estate investors who plan to:
These loans often come in two phases:
🏗️ These are often called DSCR construction-to-perm loans.
Lenders use pro forma financials to calculate projected DSCR:
DSCR = Projected Net Operating Income (NOI) ÷ Annual Debt Service
A DSCR of 1.20–1.30 is typically required to get approved.
✅ Mixed-use properties also qualify, as long as they generate stable rental income.
No W2s, no tax returns, no DTI calculations—approval is based on the deal.
Close in an LLC or corporation. Great for developers and long-term investors.
Choose a lender that offers built-in DSCR takeout refinancing or use a third-party lender once the project stabilizes.
DSCR lenders can fund in 3–5 weeks, compared to months with banks or SBA lenders.
| Feature | Typical Range |
| Credit Score | 680+ |
| Down Payment | 20–30% of total project cost |
| Loan Amount | $250K–$10M+ |
| Construction Term | 12–18 months (interest-only) |
| DSCR Requirement | 1.20–1.30 (at stabilization) |
| Exit Strategy | Refi into DSCR loan or sell |
| Ownership Type | LLC, Corp, or Trust |
| Reserve Requirements | 6–12 months debt service (sometimes waived with experience) |
Investor: Nick, experienced BRRRR investor in North Carolina
Project: Ground-up fourplex in Raleigh suburbs
Land Cost: $90,000
Construction Budget: $410,000
Total Cost: $500,000
Projected Rent: $5,600/month
Monthly Expenses: $1,400
Monthly NOI: $4,200 → Annual = $50,400
PITIA on new loan: $42,000/year → DSCR = 1.20
Outcome:
Look for locations with:
Top locations include:
💡 Some lenders offer a single-close DSCR construction-to-perm loan with fixed terms from day one.
| Feature | DSCR Construction Loan | Bank or SBA Construction Loan |
| Income Verification | ❌ Not required | ✅ Required |
| Timeline | ✅ 3–5 weeks | ❌ 8–12+ weeks |
| Ownership Flexibility | ✅ LLC or Corp allowed | ❌ Often requires personal guarantee |
| Loan Qualification | Based on projected DSCR | Based on borrower’s income |
| Best For | Rentals or investment flips | Owner-occupied projects |
DSCR loans for ground-up construction projects give investors the ability to build cash-flowing assets without jumping through income verification hoops. If you’re ready to expand your portfolio with new builds, these loans provide:
Build it. Rent it. Refinance it. Scale it. With DSCR construction loans, your next property doesn’t have to start with a listing—it can start with a blueprint.
Sponsored Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
