On 1–4 unit residential investment properties, wholesale DSCR lenders use a gross-income ratio: DSCR = Gross Monthly Qualifying Rent ÷ Monthly PITIA. Management fees, maintenance reserves, and vacancy assumptions are not deducted from the numerator on 1–4 unit loans.
On 5–9 unit and 10+ unit commercial multifamily loans, underwriters switch to Net Operating Income (NOI): DSCR = Annual NOI (Gross Rent − Vacancy − Operating Expenses) ÷ Annual Principal & Interest Debt Service.
The #1 reason a projected 1.20x DSCR drops to 0.95x during underwriting is underestimating post-acquisition property tax reassessment or coastal windstorm insurance. Use our 100-County Tax & Insurance Atlas (/county-atlas) to verify exact county millage and reassessment rules before submitting your offer.
Yes, on wholesale shelves that qualify using the initial 10-year interest-only payment (ITIA), removing principal amortization increases your DSCR ratio by 12% to 18%.