Investor · Build, Rent & Refinance
Build to Rent Calculator: Construction Loan to DSCR Refinance
Quick answer: A build to rent deal works when the finished home appraises high enough for the long-term rental loan to pay off the construction loan and return most of your cash, and the rent covers the new payment. Lenders measure that coverage with DSCR: monthly rent divided by principal, interest, taxes, insurance and HOA. Enter your build budget, appraisal and both term sheets to see your DSCR, cash flow and the cash left in the deal.
Built by Jim Blackburn · NMLS #1072866 · $500M+ closed · 7× Scotsman Guide Top Producer
Enter both interest rates to see interest carry, payment, DSCR and cash flow. The loan-to-cost and refinance loan-to-value figures are examples, not a quote; replace them and the example costs, value and rent with your budget, appraisal and term sheets.
Build budget
Hard costs: the physical build. Soft costs: plans, permits, impact fees, insurance and taxes during the build.
Construction loan (from your term sheet)
Construction interest accrues only on money drawn so far.
Finished rental
Rental refinance (from your term sheet)
Enter both interest rates
Estimates only — not a commitment to lend or a Loan Estimate. Jim Blackburn, NMLS #1072866.
How a Build to Rent Deal Is Financed
Build to rent uses two loans in sequence. A short-term construction loan funds part of the land and build cost, usually as a percentage of total cost (loan-to-cost), with draws released as work is completed. When the home is finished and rented, a long-term rental loan replaces it. That second loan is sized from the appraised value (loan-to-value), not from what you spent, which is why a home that appraises well above its build cost can return cash at the refinance.
Example with the starting numbers: $480,000 total cost × 80% loan-to-cost = a $384,000 construction loan, so $96,000 of cash goes in. At completion the home appraises at $600,000; 75% of that is a $450,000 rental loan. After paying off the $384,000 construction loan and $9,000 of closing costs, $57,000 comes back. Build interest, payment and DSCR depend on the rates in your term sheets.
What DSCR Means for Your Refinance
DSCR, the debt service coverage ratio, compares the property's rent to its full monthly housing payment (PITIA: principal, interest, taxes, insurance and association dues). It's how many rental-property lenders decide whether the property supports the loan without relying on your personal income.
- DSCR of 1.00: rent exactly equals the payment. The property breaks even before vacancy, repairs and management.
- DSCR of 1.25: rent is 25% more than the payment, leaving a cushion for vacancy and upkeep.
- DSCR below 1.00: the payment is more than the rent, and you cover the gap each month.
Minimum DSCR, the rent figure used (lease or appraiser's market rent) and how the ratio affects the loan-to-value you're offered all vary by lender. Check the requirement on your refinance term sheet against the result above. If the ratio comes up short, a lower loan amount, a longer term or a higher rent are the levers that change it.
Cash Back vs. Cash Left in the Deal
The goal for many build to rent investors is to get most or all of their cash back at the refinance and hold the rental with little of their own money tied up. Cash left in the deal is your construction-phase equity plus the interest you paid while building, minus any cash returned at the refinance. If the appraisal comes in low, the rental loan shrinks and you may need to bring money to the refinance closing instead of receiving it, so test a lower appraised value before you start.
Frequently Asked Questions
How does a build to rent strategy work?
You buy land and build a home with a short-term construction loan. When the home is finished and rented, you refinance into a long-term rental loan based on its appraised value, which pays off the construction loan. If the home appraises well above what it cost to build, the refinance can return some or all of your cash while you keep the property as a rental.
What is DSCR on a build to rent refinance?
DSCR (debt service coverage ratio) is the monthly rent divided by the monthly PITIA: principal, interest, property taxes, insurance and any HOA dues. A DSCR of 1.00 means the rent exactly covers the payment. A DSCR of 1.25 means the rent is 25% more than the payment. Many rental-property lenders use this ratio instead of your personal income to qualify the loan.
What DSCR do lenders require for a build to rent refinance?
Minimums vary by lender and loan program, and the required ratio can affect the loan-to-value and pricing you're offered. Some lenders also differ on whether they use the signed lease or an appraiser's market rent estimate. Ask for the requirement in writing on your term sheet and compare your result here against it.
Can I get cash back when I refinance a build to rent property?
Yes, if the new loan is larger than the construction loan payoff plus refinance closing costs. That happens when the appraised value is high enough relative to your build cost. If the new loan comes in smaller than the payoff, you bring the difference to closing. The cash returned at refinance result shows which case your numbers fall into.
How much cash is left in a build to rent deal after the refinance?
Cash left in the deal is what you put in during construction (your equity plus the interest you paid while building) minus any cash you get back at the refinance. If the refinance returns more than you put in, nothing is left in the deal and you hold the rental with no cash of your own tied up.
How soon can I refinance a build to rent home after it's finished?
It depends on the lender. Some will refinance once the certificate of occupancy is issued and a lease is in place; others require a waiting period before they'll lend on the full appraised value instead of your cost. Ask about seasoning before you close the construction loan so the refinance plan matches the lender you'll use.
Why doesn't this build to rent calculator show interest rates?
Construction and rental-loan pricing depends on the lender, the property, your credit and experience, and the loan-to-value, and it changes often, so we don't post rates. Enter the rates from your term sheets and the interest carry, payment, DSCR and cash flow results will fill in.
Planning a Build to Rent Project?
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Important Disclaimer
This calculator illustrates the construction, refinance and rental cash flow of a build to rent project using only the numbers you enter. Loan-to-cost, loan-to-value, interest rates, DSCR minimums, seasoning and closing costs vary by lender and property; use the figures from your own term sheets. The appraised value is set by an appraiser, not by this tool. Cash flow excludes repairs, property management, capital reserves and income taxes. It is not a Loan Estimate, a rate quote, a loan approval or a commitment to lend. All borrowers must qualify based on lender and property guidelines. Jim Blackburn, NMLS #1072866. Equal Housing Opportunity.