- Start from rent you can prove with signed leases on comparable homes. Lenders use the smaller of the lease or market rent, and some take only 90% of market rent on an empty house.
- Build the payment at your price: taxes as reassessed after the sale, a real insurance quote, HOA dues, and principal and interest at a sourced rate.
- The example listing at $229,000 shows a lender DSCR of 1.15, enough for every published minimum, and still loses about $230 a month after reserves.
- At 80% leverage and 7.375%, every $10,000 off the price lowers that house's monthly cost by about $67.
- Solved backward, the offer ceiling is about $194,000 at 80% leverage, $205,000 at 75%, or about $223,000 if you manage the property yourself.
- Run the numbers before you write the offer. Once you're under contract, the price is the one lever you've already used.
Two tests: the lender's and yours
Rental cash flow before you buy comes down to two calculations. The first is the lender's: DSCR, qualifying rent divided by the full monthly payment. Published minimums in October 2026 run from 0.75 at LendingOne and Defy, through 0.80 at Kiavi and 1.00 at Lima One and RCN Capital, to 1.05 at Roc Capital and Civic. Easy Street publishes no minimum, and Griffin and Angel Oak offer programs with no ratio at all.
The second test is yours, and nobody else runs it. DSCR lenders qualify the loan on the property's income, not yours, so they don't ask whether the house pays you after the costs they leave out: vacancy, repairs, capital items and management. A house can pass the first test and fail the second by hundreds of dollars a month.
The listing: a move-in-ready three-bed at $229,000
The house is a 2004 single-family with three bedrooms and two baths, vacant, with no work needed. It's listed at $229,000. Leased comparables within a mile went for $1,900 to $2,000 a month, so you underwrite $1,950. The seller's tax bill is $2,150 a year, and the subdivision charges $30 a month in HOA dues.
| Input | Amount | Where to get it |
|---|---|---|
| List price | $229,000 | The listing |
| Market rent | $1,950 a month | Signed leases on similar homes nearby |
| Property taxes at your price | 1.4% of price a year | County assessor: rate and reassessment practice |
| Landlord insurance | $1,560 a year ($130 a month) | A quote on a landlord (dwelling) policy |
| HOA dues | $30 a month | HOA budget or resale certificate |
| Loan | 80% of price, 30-year fixed at 7.375% | A DSCR rate quote at your score and leverage |
Scroll sideways for the other columns →
Step 1: pin down the rent a lender will count
Use signed leases, not asking rents and not the listing's pro forma. Match the bedroom and bath count, condition and school zone, and stay close. The lender's appraiser will form an opinion of market rent the same way, and the DSCR lender then takes whichever is smaller, your lease or that opinion. Kiavi allows the lease to count up to 110% of the market figure.
On a vacant purchase there's no lease yet, and that matters at some lenders. Roc Capital and Civic count an unleased unit at 90% of market rent, so this house would qualify there on $1,755, not $1,950. Run both numbers. If you're buying for nightly bookings, a different set of income rules applies: lenders use projections such as AirDNA at purchase and trailing 12 months of bookings at refinance. See short-term rental loans.
Step 2: build PITIA at your price, not the seller's
PITIA is principal, interest, taxes, insurance and association dues: everything the lender puts in the payment. Build each piece at the price you'd pay.
- Principal and interest. Most DSCR lenders publish 80% loan-to-value on a purchase; a few go to 85% for scores of 720 to 740 and up. For a rate, 7.375% was the 2025 median on 30-year investor loans in a third-party analysis of HMDA data; Griffin advertised from 7.125% on October 14, 2026, Defy's best case on October 23 was 7.375% at 740+ credit and 75% LTV, and Total Quality Lending showed 6.875% to 7.25% on October 26 for 800 credit, with points. At $229,000, an 80% loan is $183,200 and P&I is $1,265.
- Taxes. The seller's bill reflects the seller's assessment. Many counties reassess at the sale price, so use the rate times your price. At an assumed 1.4%, that's $3,206 a year, or $267 a month, not the seller's $179.
- Insurance. Get a landlord policy quote before you offer. Owner-occupant premiums don't apply. This one is $130 a month.
- HOA. $30 a month. Check for special assessments and any rental caps in the covenants.
Total PITIA at the list price is $1,692. Divide $1,950 by it and the DSCR is 1.15, which passes every published minimum. At Roc or Civic's 90% vacant rent it's 1.04, just under their 1.05. Using the seller's tax bill instead would have shown $1,604 and a 1.22. That one shortcut overstates the house by $88 a month.
Step 3: add the costs the lender leaves out
| Reserve | Basis | Monthly |
|---|---|---|
| Vacancy and unpaid rent | 7% of rent, near the 7.3% national rental vacancy rate for Q2 2026 (Census Bureau) | $137 |
| Repairs and capital items | 8% of rent (assumption) | $156 |
| Property management | 10% of rent, inside the 8–12% single-family managers quoted in 2026 | $195 |
| Total reserves | 25% of rent | $488 |
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Now the cash flow at the list price: $1,950 of rent, minus $1,692 of PITIA, minus $488 of reserves, is about −$230 a month. The lender sees +$258. You'd be feeding the house about $2,760 a year.
Budget the one-time costs too. A manager who places the tenant typically charges 50% to 100% of the first month's rent, and the house earns nothing until a lease starts.
Loan structure helps the lender's ratio more than your cash flow. DSCR lenders commonly offer interest-only for the first 10 years. At the list price that cuts the payment to $1,126 and lifts the DSCR to 1.26, yet the house still runs about −$91 a month after reserves, and you build no equity from payments. A 40-year term, offered at some lenders, gets you to a $1,189 payment and about −$153.
Step 4: solve for the offer price
Turn the question around: what price makes the cash flow zero after reserves? Every dollar of price adds 80 cents of loan and its share of the tax bill. At 7.375% over 30 years, each dollar borrowed costs $0.0069068 a month, so each $10,000 of price costs about $55 a month in P&I plus $12 in taxes. That's $67 a month, the number that decides your offer.
| Offer price | Loan | PITIA | DSCR, leased | DSCR at 90% rent | Cash flow after reserves | Cash to close |
|---|---|---|---|---|---|---|
| $229,000 (list) | $183,200 | $1,692 | 1.15 | 1.04 | −$230 | $52,300 |
| $215,000 | $172,000 | $1,599 | 1.22 | 1.10 | −$136 | $49,500 |
| $205,000 | $164,000 | $1,532 | 1.27 | 1.15 | −$69 | $47,500 |
| $194,000 | $155,200 | $1,458 | 1.34 | 1.20 | +$4 | $45,300 |
| $180,000 | $144,000 | $1,365 | 1.43 | 1.29 | +$98 | $42,500 |
Scroll sideways for the other columns →
At 80% leverage, the offer ceiling on this house is about $194,000, 15% under list. On the rent alone, a lender with a 1.00 minimum would pass this house at $229,000 and well above it. Lender approval isn't the test that protects you.
Other ways to close the gap
- Put more down. At 75% leverage the break-even price rises to about $205,000, but cash to close rises to $57,750 at that price. More cash in, same cash flow.
- Manage it yourself. Drop the $195 management reserve and break-even moves to about $223,000. You're paying yourself in time instead.
- Win on rate. At $194,000, a 7.0% loan turns the cash flow to about +$44; 7.875% turns it to about −$49.
- Find more rent. If the rent is really $1,850, the $194,000 price runs about −$71 a month with reserves scaled to the lower rent. Rent is the input most worth checking twice.
What the lender will ask for at your price
At $194,000 the loan is $155,200, well inside published DSCR loan ranges of about $70,000 to $4.5 million; Roc and Civic start at $75,000. Minimum credit scores run 620 to 680, with most lenders at 640 to 660.
Reserves are the line investors forget. Published requirements run from none at Kiavi to three months of PITIA at Defy and three to nine months at Easy Street. Three months here is $4,375, so plan on about $49,675 in total: $45,300 to close plus the reserves. Closing typically takes two to five weeks; Defy quotes 14 to 21 days and Griffin reports an average of 34. Expect a 5-4-3-2-1 prepayment penalty unless you pay up in rate for a shorter one.
What does break-even buy you? At $194,000 the cash flow after reserves is about zero, so your return comes from about $1,466 of principal paid down in year one, any appreciation, and whatever part of the reserves you don't end up spending. If you want cash-on-cash income from day one, you need a lower price: at $180,000 the house clears about $98 a month, roughly $1,175 a year or 2.8% on $42,500 of cash to close.
Run it before you write the offer
- Pull three to five signed leases on comparable homes and set the rent at the middle, not the top.
- Call the county assessor or check its site for the tax rate and whether a sale triggers reassessment.
- Get a landlord insurance quote on the address. Coastal, wildfire and older-roof homes can swing it a lot.
- Get a DSCR rate quote at your score and leverage, and ask whether the lender counts vacant units at 90%.
- Put the inputs into our cash flow calculator and test the ratio with the DSCR calculator.
- Set your ceiling and offer below it, so the inspection has room to find something.
- Re-run after the inspection with real repair numbers before your contingency expires.
If the house needs work, the math changes: you're buying below after-repair value and planning a refinance. The BRRRR method step by step works one of those deals through, and LTV vs. LTC vs. ARV explains how each kind of loan is sized.
A DSCR loan is business-purpose credit for a property you rent out; you and your relatives can't live in it. If you'd be moving in, that's a job for a residential mortgage lender. For tax treatment of rental income or depreciation, talk to a CPA.