Case Study: How a DSCR Cash-Out Funded a 4-Unit Acquisition

One of our investors had three paid-off rentals worth roughly $900K sitting on his balance sheet. He needed capital to buy a 4-unit. Rather than sell, he did a DSCR cash-out portfolio refinance. Here is how it worked.

The Starting Position

Three single-family rentals in Baltimore County, all owned free and clear:

• Property A: $310K value, $2,350 rent
• Property B: $285K value, $2,100 rent
• Property C: $305K value, $2,250 rent

Combined value: $900K. Combined rent: $6,700/month. No debt.

The Target Property

4-unit in the city, $475K asking price. Needed $120K down plus $15K in closing costs = $135K to close, plus he wanted $25K in reserves. Total cash need: $160K.

The Refinance

Three separate DSCR cash-out loans at 65% LTV each (conservative to keep DSCRs strong):

Gross cash-out: $585K. Closing costs across three loans: ~$22K. Net cash to borrower: $563K.

Deploying the Capital

• $160K → down payment + reserves on 4-unit
• $120K → second BRRRR project (bridge + rehab on a row home)
• $100K → liquid reserves across portfolio
• $183K → kept liquid for opportunity

The New Cash Flow Picture

Previously earning $6,700/month from three paid-off rentals with no debt. After refi:

• Three rentals now generate $6,700 gross − $4,093 debt service − $900 taxes/insurance = $1,707/month net
• 4-unit generates $4,200 rent − $2,800 debt service − $600 taxes/insurance = $800/month net
• Total portfolio net cash flow: $2,507/month (vs. prior $5,800/month)

Cash flow dropped ~$3,300/month. But the portfolio expanded from $900K of equity to $1.375M of real estate, and he still has $283K in liquid reserves.

Why This Works

The borrower traded current cash flow for future appreciation and future cash flow. Over a 5-year horizon:

• The new 4-unit will likely appreciate $50–100K
• Rents across the portfolio will rise 3–5% annually
• Debt service stays fixed
• His liquid reserves can fund the next acquisition

The Tradeoffs

What he gave up: safety of debt-free properties, immediate high cash flow, thinner vacancy/maintenance buffer.

What he gained: exposure to ~50% more real estate, diversification into multifamily, optionality via $283K liquid reserves.

Lessons

Portfolio cash-outs are powerful when the numbers support them. Keep LTVs conservative (65% here, not 75%), keep DSCRs strong, and maintain reserves. Do not lever up to 80% across a portfolio just because you can — the market will eventually test thin margins, and the investors who survive are the ones who did not stretch.

For the right investor at the right phase of their journey, a portfolio refi can accelerate growth by years.