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
You don't always want the highest possible DSCR. You want the highest cash-on-cash return after debt service. These can pull in different directions.
- Higher down payment → higher DSCR, lower rate, lower monthly payment, but more capital tied up in the deal. Lower cash-on-cash return on rent.
- Lower down payment → lower DSCR, higher rate, but less capital deployed. Higher cash-on-cash return if rent supports it.
For most Florida investors, the sweet spot is a 20-25% down payment that delivers a 1.20-1.30 DSCR. That's enough cushion to weather rate or vacancy bumps without giving up cash-on-cash return.
LLC vs. personal title — when each wins
One of the underappreciated DSCR features: you can title the property to an LLC. Common reasons:
- Liability separation. A tenant slip-and-fall lawsuit hits the LLC's assets, not your personal balance sheet. Usually paired with proper insurance and a registered agent — it's not magic, but it's real.
- Personal credit insulation. Some DSCR lenders report only at the LLC level when titled accordingly. Doesn't show on your personal credit report. Big advantage for portfolio investors who don't want their personal credit dinged with multiple mortgage tradelines.
- Cleaner reporting and accounting. Each property in its own LLC means clean books for taxes, easier to sell or refinance one without entangling others.
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 — available at a 0.25-0.625% rate premium with most lenders.
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 pick 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. A DSCR loan can close in 21-30 days vs. 45+ for a stack of conventional investment loans.
Florida-specific portfolio considerations
- Insurance is the wildcard. Stress-test deals at 30-50% higher insurance than today's quote. Florida insurance has been compounding 15-30% annually in some markets.
- 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.