DSCR Loan Case Study: Two Cleveland Duplexes

A client came to me with about $120,000 wanting to buy a single-family rental. We built a financing strategy that used the same capital to buy two turnkey duplex buildings on one lot in Cleveland, Ohio, four units, all leased, closed at a 1.82 DSCR. Your financing strategy deserves as much thought as the market and the property, and this is the whole plan, from quote to closing, with the real numbers.

Deal snapshot

This was a fully renovated turnkey investment, all four units occupied on 12-month leases at close.

Financing strategy

The approach was simple: a conservative structure that maximizes approval odds, smooths cash flow, and holds up if rates wobble. We chose a 30-year fixed over an ARM, kept leverage at 70% LTV for sharp pricing and strong day-one coverage, escrowed taxes and insurance to reduce variance, and bought the rate down modestly from about 7.00% to 6.75%. We skipped interest-only to avoid a future payment jump. With all units leased, fixed principal and interest at 6.75% gives predictable cash flow while the reserves build.

The capital stack

The buyer put 30% down and used a $10,000 seller credit to cut net closing costs to $10,400. Closing costs of $20,400 included $2,550 in points (the buydown), $2,300 origination, $1,500 legal, $600 appraisal, and $2,550 lender's title.

Year-one pro forma

Tenants pay all utilities; the landlord covers lawn care (budgeted outside the table). We model management and a maintenance reserve at 10% of rent each, and route the surplus to reserves.

Underwriting and DSCR

Because all units were leased, we qualified on the actual rent roll, so no 1007 rent schedule was needed. The bank view of DSCR is gross rent divided by PITIA: $3,320 over $1,825.75 is about 1.82, far above the lender's 1.00 floor. If your numbers are tight, improve the DSCR before you lock, and arrive with a pre-approval-ready file.

Stress testing the deal

Before locking, we stress-tested the file against rate, rent, and expense moves. Even a 50 bps rate shock or a 5% rent dip leaves the deal above 1.60 DSCR, which protects cash flow and future refinance options.

Reserves and true cost

The cash wired at closing was $112,400. On top of that, the lender required six months of PITIA in documented reserves, about $10,954.50 (verifiable funds, not paid to the lender), so the total liquid capital to document was roughly $123,354. On the buydown, paying $2,550 in points lowered the payment by about $39.76 a month, a breakeven near 64 months; for a 30-year hold that pencils, for a short flip it would not. We elected to send 100% of year-one surplus to reserves rather than take owner draws, treating the property as an asset, not an ATM.

The reusable playbook

This deal worked because we controlled the four levers that move DSCR: rent reality, PITIA accuracy, reserves, and timelines. What I would repeat every time:

• Use street-level rent comps (same bed, bath, and condition), not citywide averages, and confirm taxes at the investor rate after sale.
• Underwrite like the lender: target 1.20 to 1.25 DSCR on realistic PITIA, with tax and insurance quotes in writing, and stress test a rate and expense shock.
• Lock insurance early and use the exact premium in the DSCR calculator.
• Keep reserves liquid: at least six months of PITIA, ideally with an extra operational buffer.
• Do the points math, not vibes: only buy points if the hold beats the breakeven and prepay allows.
• Prepare documents that speed underwriting: leases and rent roll, IDs, entity docs, 90 to 120 days of statements, and phone-verified wiring.

For the rest of the toolkit, see DSCR vs conventional, DSCR vs hard money, DSCR vs bank statement, the best DSCR lenders, the red flags to avoid, and my foreign national DSCR guide. When you want to plan a deal like this, you can book a call.