As DSCR Loans evolve and grow in popularity, they are becoming widely seen as the go-to financing option among real estate investors truly looking to scale and build wealth through real estate. While DSCR Loans are still a great option for investors just starting out or those happy with a day job and a couple rentals producing income as a “side hustle,” the real power of DSCR Loans became allowing investors to build a true real estate portfolio, rental properties that generate enough cash flow to pay all the bills: the coveted “financial freedom.”
As interest rates surged in 2022 and stayed high for years, many of the remaining residential real estate investors that were still determined to continue to scale their portfolios were forced to embrace more innovative and creative strategies to secure cash flow. Strategies such as short-term rentals and the BRRRR method surged in usage as finding cash flow from vanilla single family turnkey rentals became near impossible. DSCR Loans were again the perfect match for these approaches, with the flexibility and adaptable guidelines among DSCR Lenders able to serve these new approaches, while conventional lenders and banks and credit unions stayed mostly stuck in the past.
While the BRRRR Strategy and STRs were one response to producing real estate returns in a tough market, scaling up from single family rentals to multi-unit properties is another approach many real estate investors turned to in their search for cash flow. While single family rentals can produce cash flow, many returns from SFRs are typically through appreciation. Cash flow is usually a secondary concern in this asset class, especially if utilizing traditional long-term leases rather than juicing returns through STRs, MTRs or other creative approaches. Investing in multi-unit properties, however, can produce monthly income, as each additional unit produces more revenue than the additional expenses through the concept of economies of scale. Since properties with multiple units can capture savings through shared costs for most expenses like utilities, landscaping et cetera (i.e. the costs for landscaping for one three-unit property is much less than the equivalent cost for three single family properties), investors could attain significant cash flow returns, even with a high-interest rate environment, when expanding past single family rentals.
But there is only so much scale when limited to a maximum of four units per property (known as fourplexes, quadplexes or quadruplexes depending on your linguistic cup of tea). One of the most confusing things for real estate investors looking to scale portfolios with more doors per property – i.e. past single family rentals – is the classification barrier between 2-4 units and 5+ units. Specifically, in real estate lending, 5+ unit properties are bucketed as “Multifamily” while 2-4 unit properties are not (despite having multiple units). Properties with two to four units are generally bucketed into the “Residential” classification, which comes with different loan programs and options, separate from Multifamily despite the perplexing presence of multiple units. This split is a relic of the Housing and Community Development Act of 1980 which split residential real estate financing between residential (1-4 units) and multifamily (5+ units) for forty-five years and counting, despite it being a bit illogical.
As investors searched for scale through economies of scale and explored properties with more units, many budding real estate moguls who found success with DSCR Loans began exploring the next step up – particularly smaller multifamily properties (~5-10 units), mixed use properties, i.e. smaller residential properties that mixed in a commercial unit or two, boutique hotels and portfolios of single family rentals sold together, such as bundles of 5 to 10 to 20 rentals as a group. All shared the same theme: the logical next step up in scale for real estate investors past the traditional limits of DSCR Loans including 4-unit maxes, residential usage only and one property per loan.
As you may have guessed, some DSCR Lenders began to expand their DSCR Loan programs to capture this market. Starting with the easiest expansion, small multifamily properties in the 5 to 8, 5 to 9 or 5 to 10 unit range (depending on the lender), these Multifamily DSCR Loans quickly became a popular option. There are a surprisingly large amount of these properties in the United States – data from the National Multifamily Housing Council estimates around 800,000 properties in this narrow 5-9 unit range exist in the US. Further, investors targeting this rather robust range of residential real estate struggled to find financing options for these properties, as they were too big for most residential lenders and traditional DSCR Loans, but almost always too small for typical multifamily lenders that targeted bigger properties.
For example, Freddie Mac, the dominant lender in multifamily financing, has a “small balance” sub-program for 5 to 50 unit properties and loans between $1,000,000 to $7,500,000, showing even the smaller slice of options was too big for the vast majority of the truly small multifamily (i.e. 5-10 unit properties) that needed loan amounts typically in the six figures. DSCR Loans for properties in this unit range were, as such, a much-needed option for investors in this niche and a perfect opportunity for some enterprising DSCR Lenders to step in.
Another real estate investing niche that has struggled to attain good and reliable financing options is smaller “mixed use” properties, or properties that have a small mix of residential and commercial tenants. These refer to properties, typical of older stock urban areas such as the northeast (such as New York City or Boston) or some other urban metropolises like Chicago or San Francisco, where it’s common to see properties that feature ground floor storefronts and shops with apartment units stacked on top. While larger commercial real estate lenders are friendly to the overall mixed-use trend, typically commercial financing is only available for larger mixed use newer developments, like major apartment complexes with hundreds of units and multiple shops and restaurants.
Similar to multifamily, smaller single-digit unit range fell into a lender-unloved sweet (or “sour”) spot where these mixed use properties were too big or not a fit for traditional residential lenders and too small for traditional commercial real estate lenders. In response, some DSCR Lenders included Mixed Use DSCR Loans in program expansions, typically alongside a Multifamily DSCR Loan program where guidelines and qualifications were similar, with the twist of a commercial unit or two allowed for what’s usually strictly residential.
Additionally, instead of looking for more doors per property, some real estate investors have looked to larger portfolios of residential properties in order to scrape together cash flow through volume of properties. These SFR portfolios could offer opportunities to gain economies of scale through ownership of many single-family rentals in the same market or area, where shared services (particularly management or vendors) could make the numbers work. While the financing options for these portfolios was pretty well served by several large lenders (this area of lending is not as underserved as small multifamily or mixed use), loans for SFR Portfolios were typically targeted at more institutional-like investors, looking more like commercial real estate financing (5 to 10 year terms with balloon payments) and similar qualification standards and size hurdles.
For residential real estate investors with smaller portfolios who still wanted the easy qualification and traditional 30-year fixed rate structure, but with fewer headaches and bookkeeping (i.e. one loan for 10 properties instead of worrying about 10 individual loans for 10 properties), DSCR Loans for SFR Portfolios were a welcome option. Additionally, there is a rental property niche in the low-property-value range, such as properties with valuations in the five figures, common in rural markets or Section 8 properties in urban cores. Needing loan amounts below most DSCR Lender minimums (for individual DSCR Loans), and out of the lending box for most institutional SFR portfolio lenders, some DSCR Lender portfolio loan options made these investments financeable.
Sometimes called “blanket loans” or “cross-collateralized loans,” these have begun to appear in some DSCR Lender offerings as well. However, as of 2025, they remain relatively rare outside of the low-value-niche as they typically don’t offer any better rates or terms for properties otherwise eligible for individual DSCR Loans (and sometimes present additional qualification hurdles) than just doing individual loans for the same portfolio of properties, so it remains a relatively small subset of DSCR Loans in 2025.
Finally, many short-term rental investors have begun to dabble and expand into the world of “boutique hotels,” realizing that their well-earned hospitality and short-stay management and investing experience could scale with larger hotel-like properties. Alas, DSCR lenders, even those that are counted as the “STR-friendliest” haven’t been able to expand to serve borrowers for these properties as of 2025, as DSCR STR Loans continue to max out at the traditional four-unit limit or single “condotel” units – anything bigger, which generally means motel or hotel, remains a no-go.
Q: Can I get a DSCR Loan on a Boutique Hotel?
A: No, DSCR Loans are pretty much universally not available for "boutique hotels" or properties used for short-stays with greater than four units (keys)
As of 2026, these expanded loan programs are still only offered by a minority of DSCR Lenders. Maybe a half of DSCR Lenders will offer Multifamily DSCR Loans (from 5 to 8, 9 or 10 units typically), while probably fewer than a quarter will offer Mixed Use or Portfolio “Blanket” financings. This chapter will provide an overview on what to expect for these expanded DSCR Loan programs, which generally are going to look a lot like DSCR Loans in structure and qualification, but have enough differences that they will typically have their own pricing (higher rates and fees) and higher qualification hurdles (typically lower maximum LTVs and higher minimum credit scores and DSCR ratios) as well as elevated experience requirements.
Next, we'll do deep dives into DSCR Loan expanded loan programs, focusing on:
DSCR Loans for Multifamily Properties
DSCR Loans for Mixed Use Properties
DSCR Loans for Portfolios (DSCR Blanket Loans)
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