About the Deal

The property is a tenant-occupied single-family rental in Manor, Texas, located east of Austin in a market that has absorbed significant population growth over the past several years. The investor owned the home and came looking for a DSCR cash-out refinance to fund another acquisition. What made the deal structurally interesting was his stated timeline: he planned to refinance out of the loan within five years. That information shaped the product selection. A fixed 30-year rate made less sense for a borrower with a defined exit, and the 5/6 ARM offered a lower rate for the period he actually planned to hold it.

What Made It Special

•        ARM product aligned to exit strategy. The 5/6 ARM is not the right product for every DSCR borrower. It is the right product for one who will refinance before the rate adjusts. This investor stated his five-year plan upfront, which allowed Ridge Street to recommend a product that reduced his carrying cost during the hold period without creating the rate exposure that concerns longer-term holders.

•        Portfolio expansion without personal DTI impact. DSCR cash-out refinances qualify on the property’s rental income rather than the borrower’s personal income. The proceeds funded a new acquisition, and neither the existing refinance nor the new purchase affected his personal debt-to-income ratio. He added to his portfolio without the transaction appearing on his personal income-based credit exposure.

•        Conservative LTV with positive cash flow. At 60% LTV, the borrower had built meaningful equity in the property before the refinance. The 1.02 DSCR at that leverage level means the property covers its full debt service with the new loan in place — a modest but real positive margin that keeps the asset cash-flow positive. For Texas DSCR loans, a borrower with 60% LTV, an occupied property, and a clear refinance or exit strategy is generally viewed as a straightforward deal by most lenders.

The Result

The completed DSCR cash-out refinance delivered equity for the borrower’s next acquisition with a rate structure matched to his five-year refinance plan.

•        Loan Amount: $171,600 — 5/6 ARM DSCR Loan

•        Rate: 6.658%

•        LTV: 60%

•        DSCR: 1.02

•        Loan Type: Cash-Out Refinance

More About Ridge Street Capital

Ridge Street Capital provides fix and flip loans, DSCR loans, and ground-up construction financing to real estate investors across 35 states. Our focus is exclusively on investment properties, which means every deal we evaluate gets the attention of a team that has seen the full range of what makes an investment work or fail.

If you look for a lender who will tell you clearly whether a deal makes sense, and move fast when it does, contact us:

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