DSCR Loan Commercial Los Angeles | Underwriting Guide

If you’re exploring a DSCR loan commercial Los Angeles (for retail, mixed-use, office, industrial, or small multifamily), here’s how lenders actually size the loan—and what to prep so your deal sails through.

What DSCR Means (and the targets lenders expect)

Debt Service Coverage Ratio (DSCR) = Net Operating Income ÷ Annual Debt Service.Typical targets land around ~1.20–1.35x for small commercial in LA, higher for riskier assets or short leases. Your DSCR is sized on lender’s version of NOI, not yours.

How lenders normalize NOI (the part that surprises buyers)

• Vacancy/credit loss: Lender may underwrite market vacancy even if you’re 100% full.

• Non-recurring expenses: They’ll add back “missing” items (management, reserves, maintenance) if you left them out.

• Property taxes reset: Underwritten taxes assume a post-sale basis.

• Other income: They haircut anything unstable (e.g., one-off fees).

Lease quality: LA reality

• Remaining term matters. Short terms or month-to-month tenants lower loan proceeds.

• NNN vs gross. Clean pass-throughs (NNN/CAM) help DSCR.

• Rollover schedule. Multiple expirations in year 1–2 = more conservative sizing.

  
  

Rate, amortization, and LTV (why proceeds change)

• Interest rate & amortization directly change annual debt service (and DSCR).

• Leverage (LTV) is capped by the lower of DSCR sizing or LTV policy. Don’t be shocked if DSCR—not LTV—becomes your ceiling.

Appraisal & stress tests

• Appraisal: Must support value and income.

• Stress test: Lender bumps the rate or trims NOI to see if DSCR still clears the bar. Proceeds get resized accordingly.

Your packaging checklist (speeds up approvals)

• Current rent roll and T-12

• Copies of all leases + amendments + options

• NNN/CAM history and reconciliations (if applicable)

• Operating statements 2–3 years (if available)

• Estoppels plan and any major property updates (roof/HVAC/electrical)

• Borrower financials (for most small-balance programs) and REO schedule

Common reasons loans get cut (or denied)

• Inconsistent numbers between rent roll, T-12, and leases

• Large near-term lease rollover without a believable plan

• Environmental unknowns (prior auto/dry cleaner/printing use)

• Optimistic NOI that ignores taxes reset, reserves, or realistic vacancy

How to increase proceeds (without magic)

• Present stabilized NOI with a supportable path to income (market rent comps, TI/free-rent norms, leasing timeline).

• Clean up pass-throughs and lease abstracts so the appraiser and lender don’t have to guess.

• If rollover is heavy, show renewal interest or LOIs (when available).

FAQ: DSCR Loan Commercial Los Angeles

What DSCR do I need? Plan for ~1.20–1.35x; higher if leases are short or the asset/location is hairier.

Do lenders use my NOI? They start with yours and normalize it. Expect taxes reset, reserves, and vacancy adjustments.

Can I refinance with vacancy? Yes—if you document the lease-up plan and DSCR still pencils under conservative assumptions.

Bottom line

A commercial DSCR loan in Los Angeles lives or dies on clean income, realistic expenses, and lease quality. Package stabilized NOI with a believable path, and the sizing conversation gets easier.

Talk to a Commercial Realtor (Los Angeles) — I’ll review your rent roll and T-12 and help you prep a lender-ready package.