How to Structure DSCR Multi-Unit Loans in Colorado for Maximum Leverage

Colorado’s real estate market has long been a target for investors seeking consistent rental income and strong appreciation. From the busy streets of Denver to the developing suburbs of Greeley and Pueblo, the demand for multi-unit properties continues to rise. For mortgage loan officers and brokers, this trend presents an opportunity to educate investor clients on how to use DSCR (Debt Service Coverage Ratio) loans to build wealth with maximum leverage—without the hassle of full income documentation.

Multi-unit properties—typically 2-4 units, but occasionally more—are especially attractive for investors aiming to scale their portfolios. The combination of multiple rental incomes, limited management overhead, and favorable lending terms makes these properties highly efficient. In Colorado, where population growth, rental demand, and land constraints fuel housing shortages, these investments offer both steady returns and appreciation potential.

Unlike traditional loans that rely on personal income and DTI ratios, DSCR loans assess the property’s ability to service its own debt. This shift in underwriting philosophy is the cornerstone of investor lending flexibility. NQM Funding, a leading Non QM Lender, offers DSCR loan programs designed to simplify the qualification process, streamline approvals, and empower brokers to close more investor deals.

To structure these loans correctly, brokers must understand both how DSCR is calculated and how to use market-driven strategies to strengthen the application file.

DSCR is calculated by dividing the property’s gross rental income by its monthly debt obligations. A DSCR of 1.00 means the property generates just enough income to cover the loan payment, while anything above 1.00 indicates a buffer. NQM’s DSCR program allows for a maximum LTV of up to 80% when the DSCR is at or above 1.00, providing the leverage investors seek. For properties with slightly lower DSCR ratios, the LTV may be adjusted accordingly.

One strategic way to boost DSCR on a Colorado multi-unit property is to ensure the appraiser’s Form 1007 rent schedule is supported by strong market comps. Brokers can guide investors to gather up-to-date lease agreements and demonstrate a rent history that exceeds local average benchmarks. In markets like Denver or Boulder, where rental caps or seasonal vacancy can skew projected income, a well-documented lease file becomes a competitive advantage.

It’s also possible to incorporate interest-only loan structures to improve the DSCR calculation by reducing monthly payments. This approach is particularly valuable for investors seeking short-term cash flow optimization. By reducing the debt burden in the early years of the loan, borrowers can preserve liquidity for property upgrades, additional acquisitions, or reserve funding.

In situations where investors are purchasing multiple properties at once or refinancing an existing portfolio, brokers can work with lenders to explore cross-collateralization or blanket loan structures. This is especially effective if one property has a weaker DSCR, which can be offset by the stronger performance of another property in the group. NQM Funding’s flexibility in evaluating blended portfolios helps brokers serve experienced investors building long-term strategies.

In Colorado’s urban cores, multi-unit inventory is often limited, but rural or suburban towns offer excellent entry points. Pueblo, Greeley, and Colorado Springs have witnessed strong rent-to-value ratios, enabling investors to maintain DSCR levels above 1.00 even with modest down payments. These regions also provide access to affordable renovation opportunities that can boost rental income post-close—further improving DSCR and ROI over time.

Brokers should also be prepared to help investors understand the importance of correct documentation. Although DSCR loans do not require tax returns, borrowers must provide a complete appraisal with 1007 rent schedule, current lease agreements (if available), and proof of reserves. Reserve requirements vary but typically range from 3 to 6 months’ worth of PITIA (principal, interest, taxes, insurance, and association dues).

Property condition can also affect qualification. While DSCR loans are commonly used for turnkey rental properties, some lenders may allow for light rehab financing depending on the borrower’s experience and equity contribution. In all cases, the appraised value and market rent must justify the requested loan amount.

For brokers looking to gain a competitive edge in the Colorado market, structuring DSCR loans correctly is about more than documentation. It’s about positioning the property’s income potential in the most favorable light. This includes using recent market rent comps, correcting any appraiser miscalculations during review, and structuring the loan term (e.g., 30-year fixed vs. IO) based on the investor’s cash flow goals.

It’s also wise to understand each local market’s vacancy rates and rental demand trends. For example, while Boulder may offer high rents, it also comes with zoning challenges and affordability restrictions. Meanwhile, Fort Collins offers stable rent growth and a steady supply of tenant demand from the nearby university population. In contrast, Colorado Springs has a growing defense and tech industry that drives demand for multi-unit housing.

Mortgage professionals must educate their investor clients about the DSCR threshold and what it means for leverage. Properties that barely meet the 1.00 minimum may qualify for max LTV but offer limited buffer. A DSCR of 1.20 or higher can improve loan pricing and mitigate risk if rents fluctuate or vacancies occur. Guiding borrowers to properties with value-add potential can be the key to unlocking long-term success.

Some borrowers may attempt to include projected rents not yet achieved. Brokers must work with realistic numbers backed by documentation. Inflated DSCR calculations that can’t be justified by the appraiser’s rent schedule will result in lower loan approvals or rework. It’s better to work with factual income and structure the loan conservatively than to delay closings or reduce LTV at the last minute.

DSCR loans are also flexible in terms of ownership. Many investors prefer to close in the name of an LLC for liability protection and tax planning. NQM Funding supports LLC vesting for qualified borrowers, adding another layer of appeal for professional real estate investors and serial buyers.

When analyzing a client’s portfolio, brokers should look for opportunities to refinance older properties with strong equity and use the cash-out proceeds for down payments on new multi-unit purchases. This leverages current assets to expand portfolio size without increasing personal liability or crossing DTI limits. In a rising interest rate environment, this strategy helps investors stay liquid while preserving leverage.

NQM Funding offers specialized tools to support brokers working with DSCR borrowers. The Quick Quote platform provides instant scenario-based pricing and qualification. This allows brokers to provide quick answers to clients exploring their next acquisition, helping to move deals forward with urgency and clarity.

DSCR loans are more than just a product—they’re a platform for building investment success. When structured properly, they allow for repeatable transactions, scalable growth, and financial independence for investor clients. Brokers who understand how to build these files, guide their clients on rental performance, and leverage the power of Non QM Loan products will dominate in Colorado’s investor-heavy markets.

To get started with the DSCR Loan program, visit the DSCR page or head to the homepage to explore all available Non QM Loan solutions. Brokers interested in blended files using Bank Statement or P&L documentation can work with NQM Funding to qualify borrowers with more complex financials. No matter the scenario, the right structure leads to the right solution.

Another critical consideration for structuring DSCR loans is understanding the interplay between property taxes, insurance premiums, and HOA dues. These expenses directly impact the PITIA calculation, which is a central component of the DSCR formula. In many parts of Colorado, especially new developments in the Denver suburbs, HOA fees can be substantial. Brokers must ensure these figures are accurately captured in the analysis to avoid DSCR surprises late in underwriting.

Appraisal issues can also impact the approval timeline. Brokers should advise clients to order full appraisals early in the process and ensure the appraiser has access to all units. Properties with inaccessible units, poor maintenance, or missing leases can trigger conditions or delays. Experienced investors understand this, but newer borrowers may need coaching to streamline the appraisal process.

It’s also worth noting that DSCR loans may allow for short-term rentals, depending on the lender and property location. Colorado’s popularity with tourists makes STR properties an attractive option, particularly in mountain towns like Breckenridge, Vail, and Estes Park. Brokers must confirm local zoning laws, permit requirements, and rental restrictions before proposing DSCR financing on these properties. Lenders may require proof of rental income through platforms like Airbnb or VRBO, or rely on appraisal-based projections if no historical rental data exists. These deals often demand greater documentation scrutiny, but they can be highly profitable when properly structured.

As DSCR lending continues to grow in popularity, especially in competitive real estate markets like Colorado, brokers who fully grasp the nuances of property performance, cash flow optimization, and underwriting flexibility will rise above the competition. The combination of local market insight and deep product knowledge allows you to guide clients more strategically—and close more high-quality investor loans.

By aligning with NQM Funding, brokers gain access to a partner who understands the realities of modern investment lending. From LLC structures and rental-based approvals to creative strategies involving interest-only payments or portfolio consolidation, the tools are in place. What remains is execution—and that starts with brokers who are ready to lead.

Explore your next scenario, submit a Quick Quote, and show your investor clients what’s possible with the right structure and the right Non QM Lender.