| The two documents | The signed in-place lease, and the appraiser's comparable rent schedule |
| Common forms | Form 1007 for a single unit, Form 1025 for two to four units |
| Purchase, in general | The lower of the in-place lease and market rent |
| Refinance | A lease above market can count beyond market where the program allows it and payment is documented |
| A rent receipt | Evidence the tenant actually pays, usually bank deposits or a rent ledger. Not the lease itself |
| Vacancy | Treated differently by program and by transaction, and sometimes not permitted at all |
Short answer: the rent in a DSCR calculation is not the rent on the listing and often is not the rent on your lease either. It is a figure the lender derives from two documents, the signed lease and the appraiser's rent schedule, then adjusts by rule. On a purchase the usual result is the lower of the two. Adding up advertised rents almost always overstates what a lender will count.
A companion article walks the rule set program by program. This one is about something different: where each number physically comes from, what you have to produce to support it, and why the advertised figure and the qualifying figure diverge.
The two documents that produce the number
The appraisal's rent schedule
For a single unit the appraiser completes a comparable rent schedule, commonly Form 1007. For a two-to-four unit property it is a small residential income property appraisal report, commonly Form 1025, with an operating income statement. The appraiser researches rented comparables and states an opinion of market rent for each unit.
This is the number most investors never see until it arrives, and it is the number that most often shrinks a file. A seller can advertise any rent. The appraiser has to support the figure with comparable leases.
The lease
The in-place lease is the signed, executed agreement with the current tenant. Three things about it matter.
- A proposed lease, a letter of intent, or a listing at an asking rent is not an in-place lease.
- A lease signed with a related party invites scrutiny.
- A lease above market generally needs proof that the tenant actually pays it, which is what a rent receipt means in this context: a bank record or rent ledger, not the lease itself.
Those three points account for most of the difference between what a seller presents and what an underwriter accepts.
Why the advertised gross and the qualifying rent differ
A listing's gross rent is the sum of what each unit is leased at or asking. The qualifying rent is the sum of what each unit is allowed to count. Four things create the gap.
- The lower-of rule. Where a lease exceeds market rent on a purchase, the market figure is generally the one that counts.
- Vacancy. An empty unit has no lease. Depending on program and transaction it counts at market, at a discount, or not at all.
- Documentation. An above-market lease without proof of payment falls back to the lower figure.
- Ineligible income. Furniture rental, parking billed separately, utility reimbursements and short-term platform revenue are treated differently or excluded depending on the program.
None of those are negotiable at the closing table. They are program rules applied to documents.
A hypothetical worked example
Assumptions, all hypothetical: a triplex marketed as producing $5,650 a month.
| Unit | Advertised | In-place lease | Appraiser's market rent |
|---|---|---|---|
| 1 | $2,100 | $2,100, tenant of three years | $1,750 |
| 2 | $1,800 | $1,800 | $1,800 |
| 3 | $1,750 | vacant, asking $1,750 | $1,750 |
| Total | $5,650 |
As a purchase, under the one-to-four unit rules modeled in Stonehaven's calculator, each occupied unit counts at the lower of lease and market, and the vacant unit counts at market because there is no lease to compare.
| Unit | Counts at | Why |
|---|---|---|
| 1 | $1,750 | Lease exceeds market. The 115 percent allowance applies to refinances, not purchases. |
| 2 | $1,800 | Lease and market agree. |
| 3 | $1,750 | Vacant, so the market figure is used. |
| Qualifying rent | $5,300 | $350 a month below the advertised gross. |
The same property as a refinance produces a very different picture. With a rent receipt supporting unit 1, the lease counts up to 115 percent of market, which is $2,012.50. Unit 2 is unchanged at $1,800. Unit 3, still vacant, is not permitted at all on a one-to-four unit refinance in this rule set, so it contributes nothing and the file is flagged. Qualifying rent falls to $3,812.50.
That is the lesson in one property. The same three units produce $5,650, $5,300 or $3,812.50 depending on which document supports them and which side of the transaction you are on.
What to gather before you rely on a number
- The signed leases for every occupied unit, with start and end dates.
- Proof of payment for any lease above market, typically bank deposits or a rent ledger.
- An honest read of comparable rented properties, not comparable listings.
- The status of every unit, including whether a departing tenant has given notice.
- For short-term rentals, statements from a third-party platform or manager rather than your own records.
Gathering these before you make an offer is the cheapest underwriting you will ever do.
Where lenders differ
The rules described here are the ones modeled in Stonehaven's DSCR Program Calculator. They are a working model of a common program, not a universal standard. Lenders differ on the size of the allowance for an above-market lease, on whether a vacant unit can count at all, on how much of a haircut a short-term rental takes, and on what documentation a receipt requires. Two lenders can look at the same triplex and produce different qualifying rents, which is the ordinary reason a deal that does not work at one place works at another.
Mistakes to watch for
- Underwriting a purchase off the listing's advertised gross.
- Assuming a strong lease always beats market rent. On a purchase the lower figure generally governs.
- Forgetting that the above-market allowance is a refinance feature.
- Planning a refinance while a unit is vacant.
- Counting a renovation-ready pro forma rent that no comparable currently supports.
- Treating tenant-paid utilities or parking as rent without confirming the program allows it.
Each of these is discovered at the appraisal, which is the most expensive place to discover anything.
Frequently asked questions
Does the lender use my lease or the appraiser's market rent? Generally the lower of the two on a purchase. On a refinance an above-market lease can count beyond market where the program allows it and you can document payment.
What counts as proof that the tenant pays? Usually bank deposits or a rent ledger showing the payments. The lease alone states an obligation, not a payment history. Requirements vary by lender.
Can I use the rent I expect after renovating? Generally not on a standard DSCR purchase. The appraiser's market rent reflects the property as it is. Renovation plans usually belong in bridge financing followed by a refinance.
What if a unit is vacant? It depends on program and transaction. On a purchase it commonly counts at market. On a one-to-four unit refinance it may not be permitted at all.
Why did two lenders give me different qualifying rents? Because the adjustments are program rules, not arithmetic. Different programs make different allowances for above-market leases, vacancy and documentation.
Next step
Put your actual leases and the appraiser's market rents into the DSCR Program Calculator rather than the listing's gross, then send us the unit-by-unit rents, the value or purchase price, the loan amount you want, and your estimated taxes and insurance so we can review the structure. A deal review comes back from a specialist and does not require a credit pull.
Prepare a useful review file
Separate documented figures from estimates. Identify the balance date, valuation assumptions, and unresolved questions before comparing options. The lender program determines which documents it accepts.
Printable rental-income review checklist
Lease rent: __________
Market rent and source: __________
Occupied and vacant units: __________
Additional income to verify: __________
Proposed payment, taxes, insurance, and applicable association dues: __________
Prepare a unit-by-unit record where relevant. Do not automatically combine advertised rent, separately billed fees, or short-term rental revenue. Ask which income the program accepts and why. A calculator result does not replace that decision.