$980K DSCR refi: How a portfolio investor got out of hard-money on a four-unit multifamily in 34 days
An 18-month bridge on a Newark 4-plex was about to reset to a punitive extension rate. The investor needed to refinance into a real long-term product before month 20 — with a DSCR profile the community bank couldn't stomach. Here's the illustrative structure.
The scenario and numbers below are an illustrative example of how a working commercial finance broker approaches this type of file — not a specific transaction closed by Steady Path Funding. Every industry, location, and identifying detail is fictionalized. Actual terms depend on your credit, revenue, and lender fit.
The situation
A three-property investor with a stable W-2 income and a growing rental portfolio hit the classic hard-money reset wall.
Eighteen months earlier, they'd bought a distressed four-unit multifamily in Newark — $940K purchase, $60K cosmetic rehab, financed 80% with a hard-money bridge at 11.75% interest-only. The property stabilized fast: all four units leased at market ($2,850/mo average), gross rent roll of $136,800 annually, operating expenses around $38K.
The bridge lender's contract had an automatic extension clause: if not refinanced by month 20, the rate would step up 300 basis points to 14.75% — enough to erase the property's cash flow. The investor was at month 18 and starting to sweat.
Two community banks had passed. Neither would underwrite the file against personal DTI (Debt-to-Income) — the investor's three-property portfolio pushed their debt-to-income above the bank's 43% ceiling, even though every unit was cash-flow positive.
The structure
Why a DSCR loan, not a conventional investment mortgage. DSCR (Debt Service Coverage Ratio) loans underwrite the property's cash flow, not the borrower's personal debt-to-income. For a portfolio investor, this is the difference between "you don't qualify" and "here's your quote."
The math the lender priced against:
- Gross annual rent: $136,800
- Operating expenses (taxes, insurance, vacancy allowance, capex reserve, property mgmt): ~$52,000
- Net operating income: $84,800
- Proposed annual debt service at $980K, 30-yr amort, 7.25%: ~$80,200
- DSCR = $84,800 / $80,200 = 1.06
At 1.06, the file was tight but bankable. Most DSCR lenders want ≥ 1.20 for prime pricing; anything 1.00–1.19 usually costs a small rate bump. The illustrative structure:
- $980K DSCR loan, first-lien on the 4-plex
- 30-year fully amortizing, fixed 7.25% for the first 5 years, then adjustable
- 75% LTV on a $1.31M appraisal (the property had appreciated during the 18-month hold)
- No personal DTI check — key advantage for portfolio investors
- Two months of PITI reserves held at closing
- Prepay: 5/4/3/2/1 step-down over five years — cheaper than the hard-money exit fee, so this was a net win
What a savvy broker would NOT do here: overpromise a lower rate to win the file. DSCR pricing at 1.06 is honest at ~7.25%. A broker quoting 6.50% is either about to hit you with fees at close or is going to fail underwriting and burn your timeline.
The outcome
Application signed on day 3 (after two comparable DSCR quotes were run in parallel). Appraisal ordered day 5, back on day 18. Underwriting cleared day 26. Closing on day 34 — six days before the hard-money rate reset would have kicked in.
Twelve months later:
- Monthly cash flow up ~$1,900 vs. the hard-money interest-only structure (thanks to fixed amortization and dramatically lower rate)
- Property tax-deductible depreciation on the amortizing loan now flowing through Schedule E
- Investor added a fifth property in month 8 — the DSCR file's clean close made subsequent portfolio expansion easier to underwrite
The takeaway: DSCR products exist for exactly this reason — a personal DTI ceiling should not price a real estate portfolio out of long-term capital. For any investor holding 3+ doors, understanding DSCR is not optional.
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