The investor: Commercial real estate broker in Dallas. Runs his brokerage through an S-Corp. Annual gross commissions variable: $580,000–$740,000/year. After business expenses, vehicle, retirement contribution ($66,000 annual SEP-IRA), equipment, and officer compensation structuring: taxable income between $190,000 and $275,000 depending on the year. Current credit score: 736.
His prior portfolio: Six properties. Properties 1 and 2 acquired conventionally in 2018 and 2019 when DTI was manageable. Property 3 acquired conventionally in 2021 — borderline at 43% DTI. Properties 4–6 acquired via DSCR: DSCR closed them in 21–24 days each, no income discussion. His DSCR loan officer has his situation memorized.
The acquisition target: Property 7. East Dallas market — specifically Garland, where the combination of sub-$340,000 SFR prices and rents in the $2,100–$2,400 range makes standard DSCR achievable with price discipline.
Go Deeper
Mbanc NMLS #38232 | TX SML | Equal Housing Opportunity Lender
Why Conventional Was Already Off the Table
He didn’t try conventional for property 7. Properties 4, 5, and 6 taught him where conventional ends and DSCR begins.
When he tried to acquire property 4 conventionally (after having property 3 on conventional), his DTI was:
Primary mortgage: $3,100/month. Investment properties 1–3 (conventional mortgages): $3,800/month combined. Investment properties (DSCR mortgages): these appear on credit but their mortgage amounts are the documented liabilities. Car payment: $780/month. Total: $7,680/month. Documented income (best year, S-Corp, 2-year average): $238,000 = $19,833/month.
DTI at that point: $7,680 ÷ $19,833 = 39%. Under 45% — technically within convention, but adding property 4 would push to 49%. Borderline declined.
He moved to DSCR for property 4 and never looked back. Properties 4, 5, and 6 closed without his income entering any file.
For property 7: no conventional consideration. Straight to DSCR.
Property Identification — The East Dallas Research
He looks for Garland and Mesquite properties specifically. His criteria, developed over 3 years of Dallas DSCR investing:
– Purchase price: under $320,000 (at current rates and Dallas County taxes, $320,000+ at 80% LTV is difficult to standard-DSCR)
– Year built: 2000 or newer (reduces early capex risk on HVAC and roof)
– Confirmed market rent: $2,000–$2,400/month for 3BR
– Dallas County or Garland ISD appraisal district tax rate: pull actual parcel rate, not average
He found the property through a wholesale contact — a landlord liquidating a small portfolio of 3 Garland SFRs. The landlord was selling all three; he was interested in one.
Property details: 3BR/2BA SFR, Garland TX. Year built: 2004. Current tenant: logistics coordinator at a nearby distribution facility. Lease at $2,100/month. 6 months remaining. Seller asking $298,000.
His first step before making any offer: property tax research.
He went to the Dallas Central Appraisal District website (DCAD.org). Entered the property address. Found:
– Assessed value: $289,500 (reflecting recent appraisal district assessment)
– Effective tax rate on this parcel: 2.18%
– Annual tax: $6,312
– Monthly tax: $526
No homestead exemption (already confirmed — this was an investment property, not the seller’s primary residence). No reassessment surprise.
The Pre-Offer DSCR Calculation
Before making any offer on any Dallas deal, he calls Mbanc. The 15-minute call:
At $298,000 asking price, 80% LTV ($238,400 loan):
P&I at 8.25%, 30-year: $1,791/month.
Dallas County taxes (parcel confirmed 2.18%): $526/month.
Insurance (TX quote from his regular carrier): $124/month.
HOA: none.
Estimated PITIA: $2,441/month.
Qualifying rent: $2,100 (current lease — appraiser will confirm market rent separately; conservative to use lease).
DSCR: $2,100 ÷ $2,441 = 0.86 — no-ratio.
He already knows this. Dallas East at $298,000 almost always lands in no-ratio at 80% LTV at current rates. The negotiating question is: what price gets this to standard?
Working the price backward to standard DSCR:
At $2,100 qualifying rent and $526 taxes + $124 insurance = $650/month fixed PITIA components:
For DSCR = 1.00: P&I must equal or be less than ($2,100 − $650) = $1,450/month.
At 8.25%, 30-year: $1,450/month P&I requires a loan of approximately $192,800.
At 80% LTV: purchase price of $241,000.
At 85% of his negotiating position: offer $264,000. At 80% LTV ($211,200): P&I $1,587. PITIA: $2,237. DSCR: $2,100 ÷ $2,237 = 0.94. No-ratio.
He has a decision: accept no-ratio at 70% LTV or negotiate aggressively.
70% LTV analysis at $298,000: Loan $208,600. P&I $1,568. PITIA: $2,218. DSCR: $2,100 ÷ $2,218 = 0.95. No-ratio — exactly the same program, but with 30% down.
He negotiated. Seller wanted $298,000 for all three properties combined at a specified per-unit price. His counter: $268,000 for the one property he wanted.
Seller accepted $272,000 (a $26,000 reduction from asking).
At $272,000, 80% LTV ($217,600 loan):
P&I (8.25%, 30-year): $1,635.
PITIA: $1,635 + $526 + $124 = $2,285/month.
DSCR: $2,100 ÷ $2,285 = 0.92 — no-ratio. Still.
One more step: at 70% LTV on $272,000 ($190,400 loan): P&I $1,431. PITIA: $2,081. DSCR: $2,100 ÷ $2,081 = 1.01. Standard at 70% LTV.
He accepted: standard DSCR at 70% LTV. 30% down ($81,600). He had the capital.
The Application and Appraisal
Application submitted Day 1. His loan officer had his full situation on file — same credit pull as property 6, same investor profile, same document template.
Items submitted: Loan application. Property address and purchase price. 2 months bank statements (showing $142,000 in the account — down payment, closing costs, and reserve requirement covered).
Items not submitted: S-Corp tax return. K-1. Officer compensation records. Personal tax return. W-2. Business bank statements for income purposes.
Appraisal Day 5: Appraiser visited. Appraised value: $278,000 (above purchase price). Appraiser market rent: $2,200/month (above current lease of $2,100).
Qualifying rent on appraisal: $2,100 (current lease, lower than market rent). The $2,200 market rent is context — not qualification. Qualifying rent is the lower of lease ($2,100) and market ($2,200).
Final confirmed DSCR: $2,100 ÷ $2,081 = 1.01. Standard at 70% LTV.
Processing: No income review. PITIA confirmed from actual tax record and insurance quote. HOA: confirmed none. Reserves: confirmed 4 months ($8,324) in addition to down payment.
Approval: Day 18. Clear to close: Day 21. Close: Day 22.
Total Capital at Closing
| Item | Amount |
|---|---|
| Down payment (30% of $272,000) | $81,600 |
| Closing costs (estimated 2.5% of $190,400 loan) | $4,760 |
| Required reserves (4 months × $2,081) | $8,324 |
| Total capital at close | $94,684 |
He had $142,000 available. Comfortable margin. Post-close liquid reserves: approximately $47,000 remaining.
Lease Renewal and Post-Close Performance
The tenant had 6 months remaining on the lease at close. At renewal, the property management company (which handles all 6 of his prior properties) re-listed at market rate.
New lease: $2,250/month (above both the prior lease and the appraiser’s market estimate).
Post-renewal DSCR: $2,250 ÷ $2,081 = 1.08 — solidly standard.
Monthly net cash flow after PITIA at renewed lease: $2,250 − $2,081 = $169/month. After 10% property management: −$56/month. Cash flow slightly negative after management on a deal with 1.08 DSCR — the management cost is real, not reflected in the DSCR calculation.
His 7-property portfolio combined:
– Combined gross rent: $15,100/month
– Combined PITIA: $13,580/month
– Net before management: $1,520/month
– After 10% management: approximately $20/month positive
He is not in Dallas real estate for monthly cash flow. He is in it for: $5,400/month in combined principal paydown across 7 mortgages, $214,000/year in estimated depreciation deductions across the portfolio, and the appreciation thesis on DFW real estate over a 10-year hold.
His S-Corp income was never part of any DSCR transaction. Properties 4–7 closed on the deals’ economics. His brokerage continues to know nothing about his rental portfolio from any mortgage process.
The Two Lessons Every Dallas DSCR Investor Needs
Lesson 1: Know the parcel tax rate before you model anything. The difference between Dallas County’s 2.18% on this parcel and a neighborhood parcel at 2.35% is $45/month — enough to move a 1.01 DSCR to 0.99. He confirms the DCAD parcel rate as Step 1 on every Dallas deal. It takes 3 minutes.
Lesson 2: The standard DSCR threshold at 70% LTV is not a failure. He put 30% down. Standard DSCR. The deal closed cleanly with full reserves. The alternative — no-ratio at 70% LTV, same down payment, same reserves but 12 months instead of 4 — would have been fine too. But standard provides better rate pricing and cleaner program terms. When a $26,000 price reduction and a 70% LTV target can get you to standard, it’s worth the effort.
Borrower details composite and anonymized. Not a commitment to lend. TX SML | Mbanc NMLS #38232 | Equal Housing Opportunity Lender