April 22nd, 2025
Purchase a HomeRefinance My Home
Denver’s dynamic real estate market presents a wealth of opportunities for investors looking to expand their portfolios. One increasingly popular strategy is investing in multi-unit properties—specifically those with five to ten residential units. These properties offer strong income potential and allow investors to scale more efficiently than single-family homes or smaller duplexes.
At Miranda Mortgage, we’re here to help you navigate the unique financing options available for multi-unit investments. One of the most effective tools for these types of properties is the DSCR loan—designed with the investor in mind.
A DSCR loan, or Debt Service Coverage Ratio loan, is a type of mortgage that qualifies borrowers based on the income generated by the property rather than their personal income. This makes it especially appealing to real estate investors who may not fit into traditional lending guidelines due to self-employment, multiple properties, or non-W2 income streams.
For multi-unit properties—particularly those with five to ten units—DSCR loans offer a unique blend of flexibility and scalability. These properties typically fall into a commercial lending category, but DSCR loans allow them to be financed with residential-style terms and documentation.
DSCR loans provide several advantages that make them ideal for growing a real estate portfolio in Denver’s competitive market.
One of the standout benefits is the ability to secure long-term, fixed-rate financing. Traditional commercial loans often come with shorter terms and balloon payments, which can introduce risk. DSCR loans, on the other hand, may offer 30-year fixed options, helping investors lock in consistent payments over the long haul.
Another major advantage is the underwriting approach. These loans are based entirely on the cash flow of the property. That means your personal income, tax returns, or employment status are not part of the approval process. This opens the door to investors who are focused on building passive income through rental properties.
In addition, DSCR loans often come with the flexibility to choose between interest-only or fully amortizing payment structures. For investors aiming to maximize cash flow, an interest-only option can help reduce monthly expenses and improve return on investment.
While DSCR loans offer flexibility, there are still important eligibility requirements investors must meet.
First, these loans typically require a minimum 25 percent down payment or equity position. This ensures a reasonable loan-to-value ratio and lowers risk for both borrower and lender. For refinances, maintaining at least 25 percent equity is essential.
Experience is also an important factor. Investors must have a proven track record of managing residential or commercial income-producing properties within the past three years. First-time investors may not qualify for this particular type of DSCR loan.
Credit score requirements vary but generally start around 660. Higher scores, ideally over 720, may unlock more favorable terms and rates.
DSCR loans also require financial reserves—typically six months’ worth of principal, interest, taxes, and insurance. These reserves can come from cash, retirement accounts, or other liquid assets. It’s important to note that reserves aren’t part of the closing funds; they are simply a risk management factor.
Additionally, lenders may allow up to two vacancies in a 5–10 unit property at the time of application. This provides flexibility for transitional buildings while still maintaining adequate income to support the loan.
The cornerstone of any DSCR loan is the income the property generates. Lenders calculate the debt service coverage ratio by dividing the property’s net operating income (NOI) by the proposed monthly debt obligation.
A ratio above 1.0 typically indicates that the property generates enough income to cover the mortgage, although many lenders prefer a DSCR of 1.2 or higher. Stronger ratios suggest a safer investment and may lead to better loan terms.
To ensure the property qualifies, investors should focus on accurate rent projections, controlling expenses, and maintaining good tenant occupancy. The more stable the property’s income, the smoother the loan process.
DSCR loans aren’t just for purchases—they’re also available for refinancing. Whether you’re looking to reduce your interest rate, switch to a long-term fixed loan, or tap into equity for future investments, refinancing through a DSCR loan can be a powerful strategy.
Rate-and-term refinancing allows you to replace your current loan with more favorable terms, while cash-out refinancing enables you to unlock built-up equity. These moves can help you improve portfolio performance and reallocate capital into new projects.
Because DSCR loans focus on the property, documentation is centered around its financial performance. Rent rolls, lease agreements, and expense statements are typically required. In some cases, especially for loan amounts over $2 million, two appraisals may be needed. The lower of the two appraisals is usually used for final approval.
Investors should prepare to submit clear and accurate documentation to streamline the process and avoid delays.
Another attractive feature of DSCR loans is the ability to use gift funds. As long as the primary borrower contributes at least 10 percent of the cash to close, remaining funds can be sourced from gifts—such as from family members or business partners. This offers flexibility for investors looking to leverage outside support while maintaining an ownership stake.
At Miranda Mortgage, we specialize in financing solutions for real estate investors across the Denver metro area. We understand that multi-unit investments require more than just capital—they require strategy, speed, and a lender who understands the nuances of DSCR qualification.
Our team works closely with investors to craft solutions that align with your goals, whether you’re purchasing your next multi-unit property or refinancing for better returns. We offer personalized support, transparency, and experience every step of the way.
If you’re ready to expand your portfolio with 5–10 unit properties, now is a great time to explore your options. DSCR loans offer a powerful pathway to finance income-generating properties while keeping qualification focused on the numbers that matter most—your rental income.
To learn more, contact Miranda Mortgage today at 303.520.1786 or email Naiely@BarrettFinancial.com. Let’s work together to build a smarter investment strategy that helps you grow with confidence.
