A value-add property sat at 0.92 DSCR because of below-market rents. Three direct lenders declined on the ratio alone. Here's how the deal was placed — and why the low ratio was temporary.
An investor owned a multi-unit property with leases locked in below market — carried over from the previous owner. That put the property's current debt service coverage ratio at 0.92, meaning the in-place rent didn't quite cover the proposed payment. The investor needed a cash-out refinance to fund their next acquisition.
Three direct lenders ran the file and declined — not because the borrower was weak or the property was bad, but because each held a firm 1.0 DSCR floor. At 0.92, the deal was simply outside their box, full stop.
The 0.92 ratio was a point-in-time artifact of inherited below-market leases, two of which were expiring within months. The borrower had strong credit, reserves, and a credible plan to bring rents to market on turnover. To a specialty lender that underwrites the path rather than just the snapshot, this was a fundable deal with a clear story.
The file was shopped across the capital sources in the network that explicitly underwrite sub-1.0 DSCR — a small subset of the broader market that most investors can't easily reach on their own. The deal was placed with a specialty source at an acceptable rate, with reserves required to offset the temporarily low ratio. It closed in 11 days.
Within six months, two of the leases turned over to market rent, and the property now sits well above 1.27 DSCR. The borrower successfully deployed the cash-out proceeds into their next deal — and could refinance into standard pricing now if they choose. The low ratio that got them declined three times turned out to be the most temporary thing about the deal.
Yes, through specialty lenders that underwrite sub-1.0 DSCR down to about 0.75, plus no-ratio programs. Most major lenders hold a firm 1.0 floor, which is why a multi-source broker is useful for these deals — as this 0.92 DSCR cash-out illustrates.
Because a low ratio is often temporary — below-market rents that will reset, a property mid-lease-up, or a value-add repositioning. Specialty lenders underwrite the trajectory and the borrower's credit and reserves, not just the point-in-time ratio.
Typically a 50-150 basis point premium over a comparable 1.0+ deal, plus higher reserve requirements. Strong credit helps minimize the premium. In this case the borrower could refinance to standard pricing once rents reset above 1.25 DSCR.
Once the file reached a capital source that actually underwrites sub-1.0 DSCR, the deal was sound and moved quickly. The delay wasn't the deal's complexity — it was reaching the right lender, which is exactly what a 30+ source network solves.
We place sub-1.0 and no-ratio DSCR through specialty sources that fund what single lenders decline. See your options.
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