How Many Units Must Be Occupied for a DSCR Refinance?

A DSCR refinance on a small multifamily property has a specific minimum number of leased units, and it is a count, not a feeling. A duplex needs two of two units leased. A triplex needs two of three. A fourplex needs three of four. A single-family rental needs its one unit leased.

Fall below that count and the property is classified as unoccupied/unleased for the transaction, which carries an LTV consequence on a refinance. Fall below it while the DSCR is also under 1.00 and you hit a second, separate unit-count test — one that decides whether the loan is permitted at all rather than merely repriced.

That distinction is the whole point of this page. The two tables in our guideline do different jobs, they contain different numbers, and borrowers routinely read the wrong one.

The base table: what counts as an occupied property

This is the definition that everything else refers back to.

Written as a table:

Two things in that table surprise people. The duplex has no slack at all — one empty side and the property is unoccupied for our purposes, the same classification a fully empty house gets. There is no partial credit for being half leased.

And the fourplex bar is higher than it looks. Three of four is 75% occupancy, stricter than the triplex's 67%. The requirement does not scale with unit count, so you cannot reason your way to it from a percentage. Read the row for your specific property type.

An unoccupied/unleased long-term rental is subject to a 5% LTV reduction to the maximum permitted per the eligibility grid on any refinance transaction. That reduction does not apply to purchases. We cover the mechanics of that reduction, and what a fully vacant property faces, in [our page on a DSCR loan on a vacant rental property](/blog/dscr-loan-on-a-vacant-rental-property). This page stays on the counts.

The second table: refinances and cash-out with DSCR under 1.00

Our guideline states a separate set of unit counts that apply when the property's DSCR is below 1.00 on a refinance or cash-out.

Side by side:

The sub-1.00 numbers are lower, which trips people up, because the sub-1.00 scenario is obviously the harder one. The counts are lower; the consequence is harsher. Those are two different things.

Read alongside our DSCR restrictions, the sub-1.00 counts function as a hard floor rather than a pricing adjustment: a DSCR below 1.0 is not permitted for vacant properties, for inexperienced investors, or for portfolio loans. So on a fourplex with a 0.92 DSCR, one of four units leased is not a 5% haircut — it puts the file outside what the sub-1.00 tier permits. The base table tells you whether an LTV reduction attaches. The sub-1.00 table tells you whether a sub-1.00 file is eligible at all.

The 50%-occupancy shorthand, and why the per-unit table governs

Our guideline says the same thing twice in two different shapes, and the shapes do not agree.

In the DSCR restrictions section, the sub-1.00 rule is written as a percentage: DSCR below 1.0 is not permitted for vacant properties, with a parenthetical that 2-4 unit properties must have at least 50% occupancy.

In the occupancy definition, the same rule is written as a per-unit count: two-family = one unit, three-family = two units, four-family = two units.

Those agree on the duplex (one of two is 50%) and on the fourplex (two of four is 50%). They disagree on the triplex. Fifty percent of three units is one and a half, which is not a thing a building can be. The per-unit table says two of three — 67%, not 50%.

Both entries were added to our change log on the same date, 02/13/25, so neither is the more recent revision superseding the other. There is no version history to break the tie.

The per-unit table governs. It is the operative text — it is stated as a requirement in the occupancy definition, it produces an integer for every property type, and the percentage version is a summary of it rather than an independent rule. On a triplex with a sub-1.00 DSCR, plan on two leased units. Do not plan on one and an argument about rounding.

Why signing one more lease before you apply is usually worth more than anything else

Here is the part that costs people real money, and it is a timing rule rather than a count rule. Our guideline measures occupancy as of the appraisal inspection.

Three consequences follow, and they are unusually unforgiving.

There is no fixing it later. Most underwriting problems can be cured with a document produced after the fact. This one cannot. Once the appraiser has inspected and the unit was empty, that unit is vacant for this transaction.

A signed lease is not enough on its own. The unit has to be occupied at inspection, not merely under contract. A lease that starts on the first of next month, signed and executed, does not make a unit occupied at an inspection that happens this week.

The appraisal inspection is the deadline, not the application date. That is usually the earliest hard date in the process and it can arrive quickly. If you are one unit short and you have a tenant close to signing, the question is not whether you can lease the unit before closing. It is whether the tenant will be in the unit before the appraiser walks it.

This is why, for a landlord one unit short, one more executed and occupied lease is frequently the single highest-value action available. It can move the property from unoccupied to occupied under the base table, which addresses the LTV reduction. It can raise gross rents, which raises DSCR, which may move the file from the sub-1.00 grid into the DSCR 1.00-or-higher grid entirely. And it can lower the reserve requirement. One lease, three effects. No rate negotiation or lender comparison does that much.

What "occupied" requires beyond a signature

A unit does not count simply because a piece of paper exists. Our lease requirements are specific, and each one is a way a unit can fail to count.

The lease must be fully executed by both an eligible tenant and the borrower or guarantor as landlord. An eligible tenant is any party other than a borrower or guarantor, any affiliate, any officer, director, executive employee or manager of the borrowing entity, and any family member — spouse, siblings, ancestors and lineal descendants — of any of those people. Leasing the empty unit to your brother to make the count does not make the count.

The lease must be in the name of the borrower/guarantor or their verified property manager as landlord, must have a rental rate and terms consistent with those prevailing in the local market, must be on a form customary to the area and comply with applicable legal requirements in all material respects including required disclosures, and must cover 100% of the square footage of the unit.

Separately, no property in this program may be occupied by any borrower or guarantor. Occupying the empty unit yourself is not a fix — it disqualifies the property.

The empty unit still has to be lease-ready

Clearing the unit count does not mean the vacant unit can be in any condition.

Our guideline requires that an unleased unit be in lease-ready condition if vacant. Separately, properties with a condition rating of C5 or C6, or that are not lease ready, are an ineligible property type. All units must have a functioning kitchen and bathroom, and 2-4 unit properties must meet 400 square feet per unit.

So a triplex with two leased units and a third that has been gutted is not a triplex with an acceptable vacancy. It has a lease-readiness problem, which is a different and more serious conversation than an occupancy count.

What else moves when the count moves

Occupancy is not an isolated test. It sits upstream of several other requirements, which is why one lease can change so much.

Reserves. Our reserve requirement is 3 months PITIA for the subject property at a DSCR of 1.0 or higher, and 6 months PITIA at a DSCR below 1.0. Reserves cannot be met with gift funds, and funds used for down payment and closing costs cannot be counted toward reserves. Cash out may be used for reserves if FICO is above 700.

Which LTV grid you land on. We publish separate maximum-LTV grids for DSCR at or above 1.00 and for DSCR between 0.75 and 0.99. Moving above 1.00 changes the grid, not just a pricing adjuster.

Investor experience. A DSCR below 1.0 is not permitted for inexperienced investors. An experienced investor is a borrower or primary guarantor with a history of owning and managing commercial or non-owner-occupied residential real estate for at least 12 consecutive months in the most recent three years, or ownership in three or more properties each for at least twelve months over the past 24 months. Everyone else is inexperienced, and faces a minimum DSCR of 1.0, a maximum LTV of 75%, and a maximum loan of $1,000,000.

Portfolio loans. For portfolio transactions, occupancy is measured across the pool. A portfolio refinance or cash-out is categorized as a vacant loan transaction when 25% or more of the included properties are vacant under the occupancy definition, which requires an additional 6 months of PITIA reserves — 9 months in total. A DSCR below 1.0 is not permitted for portfolio loans at all.

Credit score interacts with unit count

One more thing that catches 2-4 unit borrowers off guard, because it is not in the occupancy section.

Our DSCR program requires a minimum FICO of 660 for all guarantors, and the middle score determines rate and LTV where there is a single guarantor. With multiple guarantors, rate and LTV are based on the lowest middle score, and all other guarantors must still meet 660.

But the 660 row of our standard eligibility grid is limited to 1 unit; the 680 and 700 rows cover 1-4 units. So on a 2-4 unit property, 660 is not the operative floor — the grid does not offer a 2-4 unit tier at that score. Worth checking before you pay for an appraisal on a duplex or fourplex refinance.

An illustration

The figures below are invented for illustration. They are not a quote, a rate, or an approval, and no part of this scenario reflects a real file.

A landlord owns a fourplex. Three units are leased; the fourth has been empty since a tenant moved out. Rents on the three occupied units total $4,200 a month. Projected PITIA on the new loan is $4,400, so DSCR is roughly 0.95 — below 1.00.

At three of four units leased the property meets the base occupancy definition, so the unoccupied classification does not attach. But with DSCR under 1.00 the file still has to satisfy the sub-1.00 requirements, prices off the DSCR 0.75-0.99 grid, and needs 6 months of PITIA reserves rather than 3.

Leasing the fourth unit at $1,300 before the appraisal inspection would raise gross rents to $5,500 against the same PITIA, moving DSCR to roughly 1.25 — onto the DSCR 1.0-or-higher grid, with the reserve requirement cut from 6 months to 3 and the sub-1.00 restrictions out of the conversation.

Lease the same unit two weeks after the appraiser inspects and none of that happens on this transaction. The unit is deemed vacant, re-inspection is not acceptable, and the file proceeds on sub-1.00 terms.

What this page does not do

This page explains the unit-count occupancy thresholds in our DSCR program guidelines, V28, and how the appraisal inspection date interacts with them. It is not an approval, a rate quote, a pre-qualification, or a commitment to lend. Nothing here is a term sheet.

It does not price your loan. Where a maximum LTV, a grid tier, or a reduction is mentioned, that is a maximum permitted under the guideline, not the LTV your file will receive. Your actual terms depend on credit, property, market and file-level review.

It does not resolve the two open items flagged above — how the base occupancy table and the sub-1.00 table interact with the 5% reduction, and the 2-4 unit FICO-740 conflict. Where our guideline is silent or internally inconsistent, we have said so rather than filling the gap with a plausible number.

It does not cover the mechanics of the 5% LTV reduction, or how a fully vacant property is treated; that is a separate page. It does not cover short-term rental income treatment, which has its own DSCR minimum, LTV cap, and 50%-of-units test. It does not cover appraisal ordering, third-party costs, timelines, or closing sequence.

Landlord-tenant law, lease enforceability, eviction timelines, rent-control and rent-stabilization rules, certificate-of-occupancy and permitting questions, and the tax treatment of rental income are all outside what a lending guideline decides. Those belong with your attorney, your accountant, or your municipality.

If you want the count applied to your specific property, send us the unit mix, which units are currently leased, and the lease dates, and we will tell you where you stand before an appraisal is ordered.

Guideline DSCR V28 · Reviewed August 31, 2026

Published September 1, 2026 · Updated September 1, 2026