The math, refresher
DSCR = Monthly Rent ÷ Monthly PITIA (principal, interest, taxes, insurance, association). A ratio of 1.0 means rent exactly covers payment. 1.25 is comfortable. 1.5+ is strong.
Most DSCR lenders price in tiers: best rates above 1.20-1.25, modest rate hits between 1.0-1.20, larger hits between 0.75-1.0, and below 0.75 most lenders won't lend at all (some specialty programs go below).
The strategic question: ratio targeting
Your down payment changes both your DSCR and how much cash you have tied up in the deal.
- Higher down payment → higher DSCR, lower rate, lower monthly payment, but more capital tied up in the deal.
- Lower down payment → lower DSCR, higher rate, but less capital deployed.
LLC vs. personal title
Many DSCR lenders let you title the property to an LLC. Points to know:
- Separate ownership. Each property can sit in its own entity, which some investors prefer for organization. Whether an LLC makes sense for you is a question for your attorney and CPA.
- Credit reporting. Some DSCR lenders report LLC-titled loans differently from personally titled ones. Ask the lender how it reports.
Tradeoffs of LLC ownership:
- Annual filing fees per LLC ($138/year in Florida).
- Some lenders require personal guaranty even when titled to LLC. Some don't.
- Takes a couple of weeks to set up a new LLC for each property if you go that route.
- Some insurance carriers price LLC-owned property slightly higher.
Prepayment penalties - the negotiation
Most DSCR loans include prepayment penalties. Common structures:
- 5/4/3/2/1 step-down - 5% if paid off in year 1, 4% in year 2, etc.
- 3/2/1 - milder, common on better-quality borrowers.
- 5/5/5/5/5 (yield-maintenance flat) - used by some lenders, brutal if you exit early.
- No prepay - usually available at a higher rate.
If your strategy is buy-and-hold for 7+ years, the prepay rarely matters - pick the cheapest rate. If you're flipping, doing a value-add and refinancing in 2 years, or might cash-out refi when rates drop, the no-prepay or shorter-prepay structure pays for itself.
STR vs. LTR income strategy
Some Florida cities (Destin, Naples, Sarasota, parts of Miami) have strong short-term rental economics. The DSCR ratio computed from STR projections (via AirDNA or actual booking history) can be substantially higher than the ratio from long-term rental comps.
- Lenders that allow STR income at 100% of projection are the best fit if STR is your strategy. Pricing typically only slightly higher than LTR.
- Lenders that discount STR by 25-40% can still work but the math has to support it.
- Lenders that only use LTR income won't work for an STR-focused property in many cases - the LTR rent doesn't justify the price.
The lender choice is the strategy here. We work with several STR-friendly DSCR lenders and picks based on the specific property and projected income.
Scaling past 4-5 properties
The reason most serious Florida rental investors end up using DSCR almost exclusively past property #5:
- Conventional investment caps at 10 financed properties via Fannie/Freddie (and gets harder past 4). Your personal DTI has to handle every property's PITI on top of your primary residence - usually impossible past a few.
- DSCR doesn't count against personal DTI. Each new property qualifies on its own rent. Twenty properties? Same qualification logic as one.
- Paperwork is dramatically lighter. No tax returns, no W-2s, no asset documentation beyond the down payment + reserves source.
Florida-specific portfolio considerations
- Insurance is the wildcard. Stress-test deals at meaningfully higher insurance than today's quote. Florida premiums have risen sharply in recent years.
- Geographic concentration. A portfolio of 8 properties all on the Lee County coast is one hurricane away from a bad year. Diversifying across Florida regions (or beyond) reduces this risk.
- Property tax resets. When you buy, the assessed value resets to current market value (no Save Our Homes cap on rentals - that's primary-residence only). Your tax burden stays at full assessed value annually.
- STR regulation risk. Florida STR-friendly cities can change ordinances. Modeling deal returns under "STR illegal in 5 years" worst case is sometimes the right discipline.