With DSCR loans, I’ve seen folks do fine by setting up strict tenant screening and automating rent collection. It’s not foolproof, but it can take a lot of the chaos out of the equation.
That’s spot on—automation and solid screening can really smooth things out. I’ve worked with a couple of clients who were convinced DSCR loans would be a headache, but once they got their systems dialed in, it was almost boring (in a good way). Curious if anyone’s run into lenders who get nervous about vacancy rates, though? Sometimes I see underwriters get twitchy if there’s even a hint of turnover...
Definitely seeing the same thing—lenders can get pretty antsy about vacancy, especially if you’re in a market with seasonal swings or a lot of competition. I’ve had underwriters ask for extra reserves just because a property had a couple months’ turnover last year. Even with solid systems, they’ll sometimes want to see a longer track record before they’re comfortable. It’s not always fair, but I get where they’re coming from... nobody wants to be left holding the bag if cash flow dips.
Honestly, I get that lenders want to play it safe, but sometimes I think they’re overreacting.
Isn’t that just part of the business? Vacancy happens. If you’ve got decent cash flow and your numbers work, why should a blip force you to tie up more cash? Seems like they’re making it harder for smaller investors to compete.“I’ve had underwriters ask for extra reserves just because a property had a couple months’ turnover last year.”
I get where you’re coming from, but I’ve been on the other side of this. When I refinanced last year, the lender flagged a single month where my tenant left early. Suddenly, they wanted six months’ reserves. It felt like overkill, but honestly, I kind of get it—one bad month can snowball if you’re not careful. Still, it does make things tougher for folks who don’t have a ton of cash just sitting around. It’s a balancing act, I guess.
That reserve requirement can really sting, especially when you’re not expecting it. Had something similar happen after a pipe burst in one of my units—suddenly the lender’s combing through every lease and asking for more cushion. I get why they do it, but it does feel like they’re prepping for the worst-case scenario every time. Out of curiosity, have you found any lenders who are a bit more flexible on reserves, or is this just the new normal everywhere?
