Long Beach investors seeking commercial property financing have a powerful tool available that bypasses the traditional income verification process: the DSCR loan. Debt Service Coverage Ratio loans qualify borrowers based on the property's rental income rather than the borrower's personal income, W-2s, or tax returns. For Long Beach's diverse investor base, from port-industry entrepreneurs and aerospace professionals to out-of-state investors attracted by the city's strong fundamentals, DSCR loans provide a streamlined path to property acquisition and portfolio growth.
With average apartment rents of approximately $2,650 per month, vacancy rates around 3.9% to 5.3%, and industrial occupancy at roughly 91%, Long Beach properties frequently generate the cash flow needed to qualify for DSCR financing. Clear House Lending offers DSCR loan programs throughout Long Beach starting at 6.25%, with loan amounts from $150,000 to $5 million and terms up to 30 years.
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What Is a DSCR Loan and How Does It Work?
A DSCR loan is a commercial real estate financing product that uses the property's income, rather than the borrower's personal income, as the primary qualification metric. The Debt Service Coverage Ratio measures how much net operating income a property generates relative to its annual debt service (loan payments). A DSCR of 1.25x means the property generates 25% more income than needed to cover the loan payments.
The formula is straightforward: DSCR equals the property's annual Net Operating Income (NOI) divided by the annual debt service. For example, a Long Beach multifamily property generating $120,000 in annual NOI with $96,000 in annual debt service has a DSCR of 1.25x, which meets the minimum requirement for most lenders.
This income-based approach makes DSCR loans particularly attractive for several types of Long Beach investors. Self-employed business owners, especially those in the port logistics and aerospace sectors, often show modest taxable income despite strong actual earnings due to business deductions. Real estate investors with multiple properties may have complex tax returns that make traditional income verification cumbersome. Out-of-state and international investors attracted to Long Beach's port-driven economy can qualify without U.S. tax return history.
Use our DSCR calculator to determine whether your target Long Beach property meets minimum coverage requirements before making an offer.
Why Are DSCR Loans Well Suited for the Long Beach Market?
Long Beach's commercial real estate fundamentals create favorable conditions for DSCR loan qualification across multiple property types.
The multifamily sector offers the strongest DSCR profiles. With average rents of approximately $2,650 per month and vacancy rates of 3.9% to 5.3%, well-located apartment buildings in Long Beach typically generate DSCR ratios well above the 1.25x minimum. Even in value-oriented neighborhoods like the Westside and Wrigley, where rents average around $1,900 to $2,000 per month, the lower acquisition costs allow properties to achieve healthy coverage ratios.
Industrial properties near the Port of Long Beach also produce strong DSCR profiles. With average industrial rents around $1.00 per square foot NNN and triple-net lease structures that shift operating expenses to tenants, net operating income from industrial properties tends to be clean and predictable. The port's record 9.9 million TEU volume in 2025 reinforces the demand stability that lenders evaluate when underwriting industrial DSCR loans.
Mixed-use properties in corridors like Atlantic Avenue in Bixby Knolls, Broadway downtown, and 4th Street in Retro Row combine retail and residential income streams that can produce attractive DSCR ratios, provided both components are well-occupied.
What DSCR Ratio Do Long Beach Lenders Require?
Minimum DSCR requirements in Long Beach vary by lender and property type, but industry standards provide a clear framework.
Most lenders require a minimum DSCR of 1.20x to 1.25x for standard investment properties. This means the property must generate at least 20% to 25% more net operating income than the annual loan payments. Some lenders offer programs with DSCR as low as 1.00x (breakeven), but these carry higher interest rates and lower maximum leverage.
Properties with DSCR ratios above 1.50x are considered strong performers and qualify for the most competitive rates and terms. A Long Beach multifamily property with a 1.50x DSCR provides a significant income cushion that protects both the borrower and lender against vacancy, rent decline, or unexpected expense increases.
The property type affects DSCR expectations. Multifamily properties typically need 1.20x to 1.25x minimum. Industrial properties with NNN leases may qualify at 1.15x to 1.20x due to the lower operating expense risk. Mixed-use and retail properties generally require 1.25x to 1.35x, reflecting the higher volatility of commercial tenant income.
Calculating DSCR for Long Beach properties requires accurate accounting for California-specific expenses. Proposition 13 property taxes, which reset to market value upon sale, can significantly impact NOI for recently acquired properties. Insurance costs, which have escalated sharply in Southern California since 2023, must be projected at current market rates. Utility costs and maintenance expenses should reflect Long Beach conditions rather than national averages.
What Are Current DSCR Loan Rates and Terms in Long Beach?
DSCR loan rates in Long Beach reflect the broader commercial lending environment, with adjustments based on property quality, location, and coverage ratio strength.
As of February 2026, DSCR loan rates in Long Beach range from 6.25% to 8.50%. The most competitive rates are available for properties with high DSCR ratios (above 1.50x), low loan-to-value ratios (below 65%), strong locations (Belmont Shore, Bixby Knolls, east Long Beach), and borrowers with good credit scores.
Loan-to-value ratios for DSCR loans typically range from 65% to 80%, with 75% being the most common for well-qualified borrowers. Higher leverage at 80% LTV is available but usually carries a rate premium of 0.50% to 1.00%.
Loan terms extend up to 30 years with fixed rates available for 5, 7, or 10 years. Thirty-year fixed-rate DSCR loans are available from some lenders, though they typically carry higher rates than shorter fixed periods.
Loan amounts range from $150,000 to $5 million for most DSCR programs, though some lenders offer higher limits for exceptional properties. Minimum credit scores typically start at 660, with the best rates reserved for borrowers above 720.
To estimate your monthly payments and coverage ratio, use our commercial mortgage calculator alongside the DSCR calculator.
How Do You Calculate DSCR for a Long Beach Property?
Calculating DSCR for a Long Beach investment property requires careful attention to both income and expense components.
Step 1: Calculate Gross Potential Income. Start with the property's total potential rental income if fully occupied at market rents. For a 15-unit apartment building in Bixby Knolls with average rents of $2,500 per month, gross potential income equals $450,000 per year.
Step 2: Subtract Vacancy and Credit Loss. Apply a realistic vacancy factor based on the submarket. Long Beach's citywide vacancy of 3.9% to 5.3% provides a starting point, though lenders typically use a minimum 5% vacancy factor regardless of actual performance. This reduces effective gross income to $427,500.
Step 3: Subtract Operating Expenses. Include property taxes (factoring in Proposition 13 reassessment at purchase price), insurance, utilities, maintenance, management fees (typically 5% to 8% of effective gross income), and reserves for capital expenditures. For a Long Beach multifamily property, total operating expenses commonly range from 35% to 45% of effective gross income. At 40%, expenses equal $171,000, leaving $256,500 in NOI.
Step 4: Calculate Annual Debt Service. Determine the total annual loan payments based on your expected loan amount, interest rate, and amortization period. For a $2.8 million loan at 6.75% amortized over 30 years, annual debt service equals approximately $218,000.
Step 5: Divide NOI by Debt Service. DSCR equals $256,500 divided by $218,000, which equals 1.18x. This falls below the typical 1.25x minimum, indicating the investor may need to increase the down payment (reducing loan amount and debt service) or identify a property with stronger income.
Which Long Beach Property Types Produce the Strongest DSCR Profiles?
Not all Long Beach properties produce equal DSCR performance. Understanding which property types and locations generate the strongest coverage ratios helps investors target their search effectively.
Stabilized Multifamily (Belmont Shore, Bixby Knolls) properties with rents of $2,500 to $3,100 per month and occupancy above 95% consistently produce DSCR ratios of 1.30x to 1.50x or higher. The combination of premium rents, tight vacancy, and coastal demand makes these properties the easiest to finance through DSCR programs.
Industrial NNN Properties (I-710 Corridor, Douglas Park) often produce the cleanest DSCR profiles because triple-net lease structures eliminate most operating expense variability. A warehouse leased to a national logistics company at $1.00 per square foot NNN on a five-year lease creates highly predictable cash flow that lenders value. DSCR ratios of 1.25x to 1.50x are common for these assets.
Stabilized Mixed-Use (Downtown, 4th Street Retro Row) properties combine residential and retail income streams. When both components are well-occupied, these buildings can produce attractive DSCR ratios. However, the commercial component introduces more volatility than pure residential, which is why lenders often require slightly higher minimums.
Value-Add Multifamily (Westside, Wrigley, Cambodia Town) properties with in-place rents below market may not qualify for DSCR financing at acquisition. These properties are better candidates for bridge loans during the renovation phase, followed by a refinance into a DSCR loan once rents and occupancy are stabilized.
What Are the Advantages of DSCR Loans Over Other Financing Options?
DSCR loans offer specific advantages that make them the preferred choice for many Long Beach investors, particularly those who face challenges with traditional income documentation.
The primary advantage is simplified qualification. By focusing on property income rather than personal income, DSCR loans eliminate the extensive documentation requirements of conventional loans: two years of tax returns, W-2s, bank statements, and personal financial statements. For self-employed Long Beach investors, particularly those in the port logistics, aerospace, or real estate industries, this streamlined process can mean the difference between closing a deal and losing it.
DSCR loans also allow portfolio growth without the debt-to-income constraints that limit conventional borrowers. An investor who already owns five or ten properties may not qualify for additional conventional financing due to aggregate DTI ratios, but each new property evaluated independently on its DSCR can still qualify for a DSCR loan.
The 30-year fixed-rate option available through some DSCR programs provides long-term payment certainty that many investors prefer. Combined with competitive LTV ratios of up to 80%, DSCR loans offer a balance of leverage, stability, and accessibility that is difficult to match with other loan programs.
Frequently Asked Questions
What credit score do I need for a DSCR loan in Long Beach?
Most DSCR lenders in Long Beach require a minimum credit score of 660, though the most competitive rates and terms are available for borrowers with scores above 720. Some programs accept scores as low as 620 with compensating factors such as lower LTV or higher DSCR ratios. Your credit score affects the interest rate, maximum LTV, and minimum DSCR requirement, so maintaining strong credit is important even though personal income is not the primary qualification factor.
Can I use a DSCR loan to purchase a property with below-market rents?
DSCR loans are evaluated based on the property's current income, not projected or market rents. If a Long Beach property has below-market rents that produce a DSCR below 1.25x, it may not qualify for a DSCR loan at the desired leverage level. In this case, a bridge loan may be the better option for acquisition and renovation, with a DSCR loan refinance once rents are raised to market levels. Some lenders will underwrite to a DSCR of 1.00x at breakeven, but with higher rates and lower LTV.
How does Proposition 13 affect DSCR calculations for Long Beach properties?
Proposition 13 is a critical factor in Long Beach DSCR calculations. Under Prop 13, property taxes reset to approximately 1.1% of the purchase price at the time of sale, with maximum increases of 2% per year thereafter. If you are purchasing a property from a long-term owner whose assessed value is well below market value, your property tax bill may increase substantially upon acquisition. This higher tax expense reduces NOI and lowers the DSCR. Always calculate your DSCR using the post-acquisition tax basis, not the seller's current tax bill.
Do DSCR loans require personal income verification in Long Beach?
No, that is the primary advantage of DSCR loans. Most DSCR lenders do not require tax returns, W-2s, or pay stubs. Qualification is based on the property's rental income and the resulting debt service coverage ratio. However, lenders will typically verify the borrower's credit score, review their real estate experience, and confirm liquid reserves (usually 6 to 12 months of loan payments). Some lenders may request bank statements to verify reserves without analyzing income.
What is the maximum loan amount for a DSCR loan in Long Beach?
Most DSCR programs offer loan amounts from $150,000 to $5 million, which covers the vast majority of Long Beach investment properties. Some lenders offer extended programs up to $10 million for exceptional properties with strong DSCR ratios and experienced borrowers. For properties above these limits, conventional commercial mortgages or permanent loan programs may be more appropriate.
Can out-of-state investors use DSCR loans for Long Beach properties?
Yes, DSCR loans are particularly well suited for out-of-state and international investors because they do not require personal income verification tied to a specific state or country. Many non-California investors are attracted to Long Beach's port-driven economy, tight multifamily vacancy, and relative affordability compared to Westside LA markets. DSCR loans allow these investors to qualify based solely on the property's income performance, making Long Beach accessible to a nationwide and global investor pool.
Contact Clear House Lending today for a free DSCR loan consultation. Our team can run preliminary DSCR calculations for your target Long Beach property and help you identify the optimal financing structure for your investment goals.