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DSCR Loans on Triplex and Fourplex Properties
By Jason Taken · Principal
DSCR on 3–4 unit rentals — LTV caps, rent roll requirements, and reserve rules for small multifamily holds.
Triplex and fourplex DSCR files qualify on aggregate rent vs debt payment. Jaken Finance Group offers up to 85% LTV on purchase/R&T and 80% cash-out in select markets for qualified borrowers.
Model rent and opex on the DSCR calculator · minimum rent for DSCR.
Triplex / fourplex DSCR — rent roll requirements
| Document | Purpose |
|---|---|
| Rent roll (all units) | Aggregate income |
| Individual leases or 1007 | Per-unit market rent |
| Operating statement | Opex for NOI review |
| Insurance quote | PITIA calculation |
Qualification uses total property rent vs total debt payment — one vacant unit can fail DSCR at high LTV.
LTV and DSCR grid (typical)
| LTV | Min DSCR (typical) |
|---|---|
| 85% purchase | 1.0–1.25 |
| 80% | 1.0 |
| 75% | 0.95–1.0 on select programs |
Jaken Finance Group: 5.75%–10.5%, up to 85% purchase, 80% cash-out select markets, ~14 business day close.
DSCR calculator · minimum rent calculator · blog: DSCR on triplex
Triplex vs fourplex — reserve difference
| Property | Typical reserve |
|---|---|
| Triplex | 3 months PITIA |
| Fourplex | 6 months PITIA |
| Mixed commercial/residential | Higher |
Vacancy on one unit of four = 25% income loss — stress-test at 75% occupancy.
Commercial vs residential DSCR
Properties with 5+ units exit residential DSCR grid — need commercial or portfolio product. Triplex and fourplex stay on residential DSCR at 5.75%–10.5% from Jaken Finance Group. Multifamily construction · DSCR hub
Expense ratio on small multifamily
Budget 35%–45% operating expense ratio on triplex/fourplex — higher than SFR:
| Expense | 3-unit example |
|---|---|
| Insurance | $4,000–$7,000/yr |
| Property tax | Market-specific |
| Maintenance | $1,500–$3,000/yr |
| Vacancy (5%) | Rent × 5% |
Conservative opex improves DSCR accuracy at 5.75%–10.5% from Jaken Finance Group.
Worked example — fourplex, one unit vacant
| Line | Value |
|---|---|
| Purchase | $520,000 |
| Gross rent (3 occupied) | $4,200/mo |
| Market rent (4 units) | $5,600/mo |
| Operating expenses (40%) | $2,240/mo |
| NOI (actual) | $1,960/mo |
| DSCR loan at 80% LTV | $416,000 |
| PITIA at 7.5% | ~$2,910/mo |
| Actual DSCR | 0.67 — fails |
| DSCR at market rent | ~1.28 — passes |
Lenders use the lower of actual or market rent on vacant units. Lease the fourth unit before application, or drop LTV to 70% and model with three units only.
Utility metering — expense ratio swings
Triplex and fourplex expense ratios vary sharply by utility billing structure:
| Setup | Landlord expense load | Typical opex ratio |
|---|---|---|
| Separate meters (all units) | Low | 30%–38% |
| Master meter, tenant reimburse | Medium | 35%–42% |
| Landlord pays all utilities | High | 42%–50% |
Submit utility bills for 12 months — underwriters will not assume separate metering without proof.
Garage and basement conversions — DSCR on non-conforming units
Chicago and DC investors often add illegal or unpermitted units during rehab. DSCR lenders require certificate of occupancy matching unit count:
| Situation | DSCR treatment |
|---|---|
| Legal 3-unit, renting 4th unpermitted | Only 3 units count toward rent |
| Permitted ADU added post-purchase | Counts after CO + 30-day lease |
| Basement unit without egress | Excluded until permitted |
Budget permit legalization before refi application — not after. A fourplex marketed as five doors may appraise as a fourplex until the fifth unit clears inspection. See Chicago two-flat financing for RLTO and permit timelines that affect unit count.
Worked example — fourplex cash-out after 18-month hold
| Line | Value |
|---|---|
| ARV / appraised value | $680,000 |
| Existing DSCR 1st (rate-and-term from BRRRR) | $442,000 |
| Cash-out request at 80% LTV | $544,000 |
| Net cash-out proceeds | ~$95,000 after closing |
| Gross rent (4 units) | $6,800/mo |
| Opex (38%, separate meters) | $2,584/mo |
| NOI | $4,216/mo |
| New PITIA at 7.25% on $544K | ~$3,710/mo |
| Post cash-out DSCR | ~1.14 |
Cash-out at 80% LTV in select markets requires 1.0+ DSCR on the new payment — not the old loan. Model the larger PITIA before you pull equity for the next acquisition. Second-position DSCR is an alternative if you want to preserve a low first rate.
Laundry and common-area income — what counts
Coin laundry, vending, and reserved parking fees on small multifamily sometimes appear on seller pro formas. DSCR underwriters typically exclude non-lease income unless documented for 24 months:
| Income type | Usually counted? |
|---|---|
| Base rent per lease | Yes |
| Laundry (owner-operated) | Often excluded |
| Garage rent (separate lease) | Yes if on lease |
| Section 8 HAP portion | Yes with HAP contract |
Scrub seller NOI before you run the minimum rent for DSCR calculator — inflated ancillary income is a common reason fourplex refis fail at 80% LTV.
Section 8 and HAP contracts — DSCR treatment
Fourplex units with Housing Assistance Payment (HAP) contracts add stable income but require lender review of the housing authority agreement:
| HAP status | DSCR treatment |
|---|---|
| Long-term HAP (5+ years) | Often counted at 100% |
| Month-to-month HAP | 75% haircut common |
| No HAP, market rent | Standard underwriting |
Submit the HAP contract and payment history with the rent roll — underwriters will not assume Section 8 income without documentation. HAP units may also trigger inspection requirements that delay lease execution; line up refi timing after HAP inspection passes.
Appraisal approach — income vs sales comparison
Small multifamily appraisals weight income approach heavily when three or more units are rented. A recent gut rehab with no lease history may appraise below ARV until units season 60–90 days. Line up your refi lender before rehab completes so lease term and deposit requirements match the appraisal effective date.
House hacking vs pure investment — DSCR entity rules
Owner-occupants in a house-hack triplex (live in one unit, rent two) may qualify for conventional or FHA financing — not DSCR. Once all units are tenant-occupied and title is in an LLC, DSCR becomes the hold product. Plan the entity transfer timing: some DSCR programs require 6–12 months of investment seasoning after you move out before cash-out refi at 80% LTV. Rent control jurisdictions (DC, parts of California) cap post-rehab rents — verify allowable increase before you model BRRRR refi proceeds on a fourplex conversion. Security deposit limits in some cities also affect move-in cash flow.
Triplex and fourplex — DSCR as the hold leg
Three- and four-unit properties straddle residential habitability rules and small commercial reserve standards. DSCR at 5.75%–10.5% works when each unit is on lease, expenses are documented, and combined DSCR clears lender floors — often with higher reserves on fourplex files. If you are rehabbing before refi, stack how to finance a 2–4 unit BRRRR deal with this guide for the permanent exit. Compare flip versus hold economics in fix and flip vs BRRRR on small multifamily before you commit to a six-month hard-money carry. The multifamily DSCR vs commercial loan page clarifies when agency-style debt applies versus investor DSCR on 2–4 units. Present a clean rent roll, utility splits, and insurance declarations — fourplex files fail most often on expense ratio assumptions, not on purchase price.