Baylor, tourism along the Silos district and steady growth along I-35 have lifted Waco values. Texas property taxes, though, take a big bite out of every rental payment, so a cash-out here starts with the tax line.
In short: LendingStreet finances DSCR cash-out refinances on 1-8 unit rentals in Waco and McLennan County, up to 75% LTV, qualified on the property's rent with no tax returns. Standard programs need the rent to cover the new payment at 1.0x. Texas property taxes on rentals with no homestead exemption, student lease cycles near Baylor and the city's STR permit rules are the local items to plan around.
A cash-out refinance replaces the current mortgage on a rental with a larger loan and hands you the difference. On our DSCR programs the new loan can go up to 75% of the appraised value, and it qualifies on the property's rent instead of your W-2s or tax returns.
The test is the debt service coverage ratio: monthly rent divided by the new payment, which includes principal, interest, taxes, insurance and any HOA dues. Standard programs look for 1.0x or better after the cash comes out, and sub-1.0 programs exist for some files. Texas homestead cash-out rules do not apply to non-owner-occupied investment property, so a Waco rental refinances under standard DSCR terms.
Near Baylor, the neighborhoods around campus and Speight Avenue have houses and duplexes leased to students. Castle Heights, Sanger Heights and the area near Cameron Park have older homes with professional tenants. North Waco and East Waco offer lower prices and more renovation projects.
Woodway and Hewitt are higher-priced suburbs with strong school demand, while Robinson, China Spring and Lorena have newer homes. Tenants include Baylor students and staff, hospital workers and employees at manufacturing and distribution sites along I-35.
Waco's housing ranges from early 20th century homes near downtown and Baylor to post-war ranches and newer suburban builds. The renovation wave tied to the city's tourism growth produced many updated homes in older neighborhoods, which helps support appraisals on similar renovated rentals.
| Area type | Examples | Typical rental | Cash-out watch item |
|---|---|---|---|
| Near Baylor | Speight Avenue area, campus neighborhoods | Houses and duplexes leased to students | Lease timing and occupancy limits |
| Established city | Castle Heights, Sanger Heights | Older single-family | Tax bill without homestead |
| Suburbs | Woodway, Hewitt, Robinson, China Spring | Newer single-family | HOA rules and school district rates |
Texas has no state income tax and relies heavily on property taxes. A Waco bill combines McLennan County, the city, the school district and other units, and the combined rate is high compared with many states. Rentals get no homestead exemption or homestead appraisal cap.
If you bought from an owner-occupant, the exemption comes off and the next bill reflects full appraised value. Pull the McLennan County Appraisal District record and budget on the full rate. Texas also has a temporary cap on annual appraisal increases for some non-homestead property, so check how it applies to yours.
Appraisal notices go out each spring, and owners can protest to the appraisal review board by the deadline on the notice. Many investors protest every year; a successful protest lowers the bill and improves the ratio on your next refinance.
This example is illustrative and not a quote. An investor owns a duplex near Baylor appraised at $330,000, owing $130,000. The units rent for $2,900 combined on 12-month leases. Taxes at the full combined rate with no homestead exemption are about $605 a month, and insurance about $230.
At 75% LTV the new loan is $247,500. After paying off the $130,000 balance, about $117,500 is left before closing costs. Estimated principal and interest on a 30-year schedule is about $1,731, so with taxes of $605 and insurance of $230 the monthly payment is about $2,566 and DSCR is about 1.13x.
Using a former owner-occupant's $420 tax bill would make the payment look like about $2,381 and DSCR about 1.22x, which overstates the ratio.
Taxes alone are more than a third of principal and interest here. Always budget on the full rate without the homestead exemption.
| Item | 75% LTV | 75% LTV, seller's tax bill |
|---|---|---|
| Appraised value | $330,000 | $330,000 |
| Loan amount | $247,500 | $247,500 |
| Existing payoff | $130,000 | $130,000 |
| Cash before closing costs | $117,500 | $117,500 |
| Estimated principal and interest | $1,731 | $1,731 |
| Taxes and insurance | $835 | $650 |
| Total monthly payment | $2,566 | $2,381 |
| DSCR at $2,900 rent | About 1.13x | About 1.22x |
Near Baylor, leases often follow the academic year. For a cash-out, underwriting uses in-place leases or market rent, so leases should cover the full year or the appraiser should be able to support the rent. Waco limits the number of unrelated occupants in some residential zones.
Waco requires permits for short-term rentals, and non-owner-occupied STRs face extra approval in many residential zones. Where a property operates legally as an STR, our STR program can use projected revenue on some programs; otherwise Waco cash-outs qualify on 12-month leases.
Central Texas sees hail, high winds and occasional tornadoes, and insurers have raised premiums and wind and hail deductibles. Roof age matters.
Properties near the Brazos and Bosque rivers and their creeks can sit in flood zones. Get the flood determination and a quote before you apply.
Older homes near downtown may have pier-and-beam foundations, which are common in Central Texas but draw appraiser and insurer attention when they need leveling. Have any foundation work documented.
Pull these together first and the file moves faster.
Our investor loans are business-purpose loans on non-owner-occupied property, and we close DSCR cash-out refinances on 1-8 unit rentals in McLennan County, including Woodway, Hewitt, Robinson, China Spring and Lorena. Cash from a refinance can go toward another purchase, repairs or reserves; how you use it is up to you.
Get a quote through the form below or at (877) 298-1001. Share the address, leases, payoff and target cash amount, and we will show the loan size, the estimated payment and the resulting ratio at two or three leverage levels.
No. Texas homestead cash-out rules apply to owner-occupied homesteads, not to non-owner-occupied investment property.
Usually property taxes. Rentals get no homestead exemption, so budget on the full combined rate.
Only with a city permit and where non-owner-occupied STRs are allowed.
Yes. DSCR cash-outs are available across McLennan County.
Seasoning varies by program. Some allow a cash-out within months of purchase, others want a longer ownership period or cap the loan at the purchase price plus documented improvements. Our seasoning guide covers the common rules.
No. DSCR loans qualify on the rental income of the property. Credit, reserves and LLC documents are still part of the file.
Yes. Business-purpose DSCR loans are commonly made to LLCs, with the members signing for the loan personally.
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