Deal snapshot
| Location | Bethesda, Maryland (East Bethesda / 20814) |
|---|---|
| Property type | East Bethesda SFR (4BR/3BA after rehab) |
| Loan type | Hard money bridge → Maryland DSCR hold |
| Loan amount | $734,400 bridge (90% LTC) |
| Close time | 9 business days |
Investor challenge
A DMV portfolio sponsor compared DC rowhouse BRRRR against Montgomery County SFR holds on the same capital. An East Bethesda four-bedroom needed $98,000 in kitchen, bath, and HVAC updates before leasing to NIH-adjacent professionals. Modeled Petworth two-unit rent at $3,850/mo cleared ~1.06 DSCR in DC; this SFR at $3,650/mo cleared 1.16 at 68% LTV with Maryland opex — distinct from the Woodmont townhome example on DSCR loans Bethesda.
Jaken Finance Group’s solution
90% LTC at 10.50% IO with 12-month term and draws tied to Montgomery County DPS milestones. Exit pre-underwritten to DSCR refi at 68% LTV — conservative leverage on tight-ratio SFR vs townhome.
Outcome
Market rent at stabilization: $3,650/mo (24-month federal employee lease)
Appraised value at refi: $915,000
DSCR refi: 68% LTV → $622,200 @ 8.25% — DSCR ~1.16; cash extracted ~$42,000 after bridge payoff
DMV hub: DSCR loans Bethesda MD · investment property financing Washington DC
Acquisition
Purchase: $720,000 · Day 9 close
Hard money: 90% LTC · 10.50% IO · 12-month term
Rehab scope
| Item | Cost |
|---|---|
| Kitchen + primary bath remodel | $44,000 |
| Hall bath + main-level LVP | $18,500 |
| HVAC replacement | $22,500 |
| Exterior paint + landscaping | $13,000 |
Total rehab: $98,000 · All-in: $818,000
Hold exit (executed)
- Gross rent: $3,650/mo
- Appraisal: $915,000
- DSCR refi: 68% LTV → $622,200 @ 8.25%
- DSCR ratio: ~1.16 at Maryland opex (24%–28% load)
Why cross-border hold beat DC on this file
Identical $3,650/mo on a DC row modeled ~1.04 at 68% LTV after DC rent-control compliance and a heavier expense load. East Bethesda SFR cleared 1.16 without TOPA timeline — enough to recycle capital without selling.
Takeaway: when permanent debt is the exit, model jurisdiction at LOI — Maryland SFR and townhome corridors often beat DC on ratio even when headline rent is similar.
DC vs Maryland pro forma (same $3,650/mo rent)
| Line | Modeled DC row | East Bethesda SFR (executed) |
|---|---|---|
| Gross rent | $3,650/mo | $3,650/mo |
| Opex load | 33% (DC rent-control compliance + reserves) | 26% (Maryland landlord) |
| Appraisal | $880,000 | $915,000 |
| LTV | 68% | 68% |
| DSCR | ~1.04 | ~1.16 |
| TOPA timeline | 30–90 days if occupied | N/A (vacant at close) |
Sponsor passed on Petworth upper/main at LOI for ratio math, not rent ceiling.
Montgomery County draw path
| Draw | % | Milestone |
|---|---|---|
| 1 | 20% | Permits + demo |
| 2 | 35% | Rough HVAC + electrical |
| 3 | 30% | Kitchen + bath install |
| 4 | 15% | Final DPS + lease-ready |
Rehab completed in 5.5 months — NIH tenant signed 24-month lease at $3,650/mo before refi application.
Flip alternative rejected at LOI
Modeled $875K–$920K ARV flip on East Bethesda SFR after $98K scope — ~$52K net after Montgomery transfer and 6-month carry. DSCR hold extracted ~$42K cash while retaining cash-flowing asset — preferred for portfolio sponsor building Maryland hold lane parallel to DC rows.
Operator lessons
Tenant screening: NIH contractor lease required 720+ credit and a one-month security deposit. One month’s rent is the Maryland ceiling for most tenancies under Real Property § 8-203, and a tenant charged more can recover up to three times the excess. Tax stress: Montgomery bill modeled +10% post-rehab — $680/mo vs $620/mo seller bill at refi. Insurance: SFR landlord policy $1,950/yr bound before DSCR application.
Cross-border stack: Sponsor held Petworth row (separate file) while extracting Maryland equity here — jurisdiction diversification without selling DC narrative assets. See DMV cross-border blog.
Woodmont alternative passed at LOI
Sponsor underwrote Woodmont townhome at $785K + $125K rehab — flip spread below 12% and DSCR ~1.02 at 70% LTV on modeled $980K ARV. East Bethesda SFR won on faster lease-up, lower HOA friction, and 1.16 ratio — see fix and flip Bethesda for Woodmont velocity vs margin tradeoff. Permanent debt was pre-approved before hard money close — refi terms locked at 68% LTV cap so stabilization target never drifted. Vacant at acquisition eliminated TOPA — lease signed 18 days after final DPS inspection; appraisal ordered same week as lease execution. Sponsor holds three Maryland SFRs and two DC rows under one Jaken Finance Group relationship — cross-border refi playbook documented in DSCR Bethesda spoke. Montgomery County tax reassessment post-rehab added $60/mo vs pro forma — immaterial to 1.16 ratio at 68% LTV. HVAC line ($22,500) was largest single draw — ordered week 2 to avoid summer lead-time slip on NIH lease start target. Kitchen + primary bath ($44,000) drove appraisal support — hall bath refresh alone would not have justified $915K value on East Bethesda 4-bed product.
Montgomery County has rent rules too — model them
The cross-border thesis was about ratio, not about escaping rent regulation. Montgomery County adopted rent stabilization, and Bethesda is unincorporated county territory, so county law applies. The County Executive’s 2026 rent stabilization letter to owners (dated February 27, 2026) sets out the current rules:
- Allowance: the maximum increase for regulated units is 5.2%, effective July 1, 2026. The formula is the Washington-area CPI-U plus 3%, or 6%, whichever is lower. CPI-U was 2.2% for this cycle.
- Coverage: unless an exemption applies, all County-licensed rental units built in or before 2003 are covered.
- Notice: landlords must give written notice of any rent or fee increase at least 90 days before it takes effect. The letter says this applies to all County-licensed rentals, including single-family homes and townhouses.
- Fee caps: application fees are limited to $25 or the actual cost of credit and screening checks.
- Guideline: the county’s 2026 Voluntary Rent Guideline is 3.3%, per the DHCA guideline page.
Renewal illustration: If this house is a regulated unit, the most the rent could rise at the first renewal is 5.2% of $3,650, or $189.80. That makes the ceiling $3,839.80 a month. With a 24-month lease, the written notice must go out by about month 21. Missing that window means the renewal rolls at the old rent.
For a DSCR file, this means underwriting rent growth at or below the allowance. It also means writing the 90-day notice date into the property manager’s calendar on the day the lease is signed. Confirm whether the property qualifies for an exemption with the county’s Office of Rent Stabilization before you assume either way. A lender reviewing the hold will ask the same question.
The DC side of the comparison, with the statutes
DC’s friction is real, but it sits in specific places. Knowing where helps you price a DC row against a Maryland house honestly.
| Cost or rule | DC row owned by an LLC | Source |
|---|---|---|
| Rent control | Usually covered if built before 1976; the small-landlord exemption needs 4 or fewer units owned by not more than 4 natural persons | D.C. Code § 42-3502.05 |
| Annual increase on a covered unit | CPI adjustment plus 2%, capped at 10% | D.C. Code § 42-3502.08 |
| Property tax (Class 1A residential) | $0.85 per $100 of assessed value | DC OTR rates |
| Deed recordation at purchase | 1.1%, plus 0.35% on residential deeds of $400,000 or more | D.C. Code § 42-1103 |
| Deed of trust on refinance (5 or fewer units) | Exempt with the required affidavit | D.C. Code § 42-1102(21) |
The takeaway is narrower than “DC costs more.” An LLC-owned pre-1976 row typically lands under rent control, while a natural-person owner with a few units may not. Recordation tax hits the purchase deed, but a residential refinance deed of trust on five or fewer units is exempt. The DC penalty on this sponsor’s model came from the rent rules and the heavier operating budget, not from the refinance itself.
Read the DC rent control exemptions guide and the Montgomery County vs DC tax friction breakdown before you pick a side of the line.
Fall 2026 market snapshot
A 2026 replay of this file would face a softer listing market on both sides of the line. Realtor.com data published through FRED shows:
| Measure (Sep 2026 vs Sep 2025) | Montgomery County, MD | Washington, DC |
|---|---|---|
| Median listing price | $599,900 vs $651,826 | $527,500 vs $589,000 |
| Median days on market | 40 vs 34 | 58 vs 52 |
| Active listings | 2,328 vs 1,898 | 2,898 vs 2,985 |
Sources: MEDLISPRI24031, MEDDAYONMAR24031, ACTLISCOU24031, MEDLISPRI11001, MEDDAYONMAR11001, and ACTLISCOU11001.
Montgomery County inventory rose about 23% year over year, and the median list price fell about 8%. More competing listings and longer marketing times weaken a flip exit more than a hold exit. That strengthens the case this sponsor made at LOI: keep the house and refinance rather than sell into a crowded resale market.
On rent, HUD’s FY 2026 Small Area Fair Market Rents for ZIP 20814 are $3,430 for three bedrooms and $4,040 for four. The $3,650 lease on this four-bedroom sits about 10% under that benchmark. Rent that is supportable rather than stretched is what an appraiser’s rent schedule will back.
What to verify before you copy this structure
- Rent stabilization status: year built, county rental license, and any exemption claim, confirmed with the county
- Renewal calendar: the 90-day notice date set from the lease start
- Screening budget: application fees limited to $25 or actual screening cost
- Deposit: security deposit at or under one month’s rent, held in a Maryland account as § 8-203 requires
- Move-out math: the same statute requires return within 45 days, with simple interest at the greater of the 1-year Treasury rate or 1.5% once held 6 months — build that into the reserve line
- Tax bill: Montgomery’s post-rehab assessment, not the seller’s bill
- Rent support: lease rent checked against HUD’s ZIP-level benchmark and recent leased comps
For a Maryland lender comparison, see hard money lenders in Montgomery County and DSCR loans Maryland.
Bethesda DMV Cross-Border DSCR Case Study: replay checklist
Case studies illustrate one closed file — not a guarantee of future terms. Before you mirror the structure:
| Step | Action |
|---|---|
| Comps | Three solds within 0.5 mi on matching bed/bath and product type |
| Carry | Model 8.99%–13.5% IO bridge and 5.75%–10.5% DSCR exit with investor tax and insurance |
| Entity | LLC vesting, operating agreement, and EIN aligned before appraisal |
| Exit | Written takeout path — DSCR refi, sale, or wholesale — before increasing rehab scope |
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