The Quick Read: On a freshly rehabbed pool, a blanket lender sizes each property on what you paid plus what you documented spending, and only later on what it appraises for, then funds the lower of the value test and the rent test. Seasoning decides which basis applies door by door.
- Cost basis means purchase price plus documented rehab spend, set property by property.
- The seasoning clock starts at the recorded deed, not at rehab completion or lease start.
- Inside the first six months, the loan is also capped at 90% of total cost; from six to twelve months, 100% of total cost.
- After twelve months, the appraised value alone is the basis.
- Your ARV estimate is a planning number. The lender’s appraisal is the number that counts.
A blanket DSCR loan is one note secured by several rentals. Lenders also call it a portfolio DSCR loan or a cross-collateralized loan. Those are the same thing. This guide walks through how the basis gets built, which number wins, and where the rule bends. For the broader picture, see the complete DSCR loans guide.
Key Terms Defined
Blanket loan: One note secured by two or more properties, with every property backing the same debt.
Cost basis: The purchase price plus documented improvements, as a lender counts it.
Appraised value: The value the lender’s own appraiser assigns, which governs once the property has seasoned.
ARV: Your projected after-repair value, a planning estimate that does not enter the sizing formula.
Seasoning: The time since the deed was recorded in the borrower’s name.
Pooled coverage: Total monthly rent across the pool divided by total monthly PITIA (principal, interest, taxes, insurance, association dues).
Payoff-only refinance: A refinance that covers only the bridge payoff and closing costs, treated as rate-and-term.
Why Does Cost Basis Show Up on a Blanket Loan?
Because each rehabbed door has its own history. The note is papered once, but sizing starts at the property level. The lender orders an appraisal on each rehabbed property and checks each deed date. One door may be four months old and another two years old. They can sit on different bases inside the same pool, and the results are summed.
Across the wholesale network, the pattern is consistent. Fresh rehabs get a cost-based cap. Seasoned properties size on appraisal. Rent coverage is a separate test layered on top.
What Counts Toward Cost Basis?
Purchase price counts. Documented improvements count. Undocumented spend does not. The lender wants the settlement statement from the purchase, plus invoices, receipts and draw history for the work. Spend without paper adds no borrowing room.
| Item | Typically counts? | Paper needed |
|---|---|---|
| Purchase price | Yes | Settlement statement |
| Contractor invoices | Yes | Invoices, proof of payment |
| Bridge draw history | Yes | Lender draw records |
| Cash-paid materials | Usually | Receipts |
| Carry, fees, interest | Varies by program | Check guidelines |
| Your own labor | Generally no | None accepted |
The last two rows vary. Confirm how a program treats carrying costs and fees before you build a budget on them.
Lender cost basis is not tax basis
Don’t confuse the two. IRS Publication 551 explains that tax basis is usually cost, that improvements with a useful life of more than one year are added to it, and that depreciation reduces it. A lender’s definition of documented rehab is program policy and doesn’t follow the tax capitalization rules. Tax treatment varies; consult a qualified professional.
The LLC Layer
LLC ownership is standard on portfolio DSCR files, subject to lender program eligibility. The principals typically still sign personal guarantees on recourse structures, and the LLC’s own traditional personal-income documentation and income history don’t drive approval. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
What matters for cost basis is alignment. The entity on the settlement statement should be the entity on title and the entity on the invoices. When several LLCs sit in one pool, each purchase needs its own paper trail. A property that moved between entities is where basis gets disputed, since the recorded deed date and the buyer on the original statement may no longer match the borrower.
The Seasoning Clock
The clock starts at the recorded deed. Rehab completion doesn’t start it. A tenant moving in doesn’t either. And strong rent doesn’t shorten it, because seasoning and coverage are separate tests.
On the 30-year portfolio DSCR loan, the rule works like this. Inside the first six months of ownership, the loan is also capped at 90% of total cost (purchase price plus documented improvements). From six to twelve months, the cap is 100% of total cost. The leverage ceiling still applies, and the loan is the lower of the two. After twelve months, appraised value alone is the basis.
A rate-and-term refinance is not subject to the cost-basis cap. Many lenders apply seasoning and tighter limits only to cash-out. A refinance that covers only the bridge payoff and closing costs is classed as rate-and-term. Cash-out on a portfolio loan never exceeds 75% of pooled value, and that ceiling holds regardless of how strong the appraisal looks.
How the Lower-Of Test Works, Step by Step
Here is the sequence, door by door and then for the pool.
1. Establish each property’s basis. Inside the window, that’s total cost. After it, that’s the appraisal.
2. Apply the leverage ceiling to that basis. The 30-year portfolio DSCR loan goes up to 80% of value on purchase and rate-and-term, and cash-out stops at 75%.
3. Sum the property results into a value-test amount for the pool.
4. Run the rent test. Pooled monthly rent against pooled monthly PITIA must clear the 1.00 floor measured on the pool.
5. Fund the lower of the value-test amount and the rent-test amount.
Pooled coverage means stronger properties can carry weaker ones. One caution: a rental that sits below 1.00 can live inside a pool, but underwriting tests the pooled coverage, the leverage and the terms. Ask the lender whether any program in your scenario also looks at each property alone.
Clearing 1.00 is not positive cash flow. Repairs, vacancy, management, utilities and capex all sit outside the ratio.
Worked Example: A Mixed Pool
These figures are modeled assumptions, not market data. Use an index of 100 for purchase price on each door.
Door one: cost 115 after rehab, appraisal 130, owned under six months. On a 75% basis, the cost-based result is about 86.25. The 130 appraisal doesn’t help yet.
Door two: same cost and appraisal, owned over twelve months. On a 75% basis, appraisal governs, giving 97.5.
Door three: owned seven months, so the 100%-of-cost cap applies beside the leverage ceiling, and the lower of the two governs.
The pool’s value-test amount is the sum of the three results. Then the rent test runs. If pooled rent supports less than that sum, the rent test wins. That’s the point worth remembering: value can cap the loan, or rent can. Whichever is lower sets the number.
The gap between 86.25 and 97.5 is the equity your rehab created but couldn’t yet borrow against. Call it trapped equity. It frees up as the clock runs.
Why ARV Is Not a Sizing Input
Investors often assume the lender will use their ARV. It won’t. Loan size equals the leverage cap times the lender’s appraised value, once appraisal governs. A rehab may support a higher appraised value, depending on comps and underwriter review, but spend doesn’t convert dollar for dollar into value.
Another trap is the 70% rule. It is buying guidance, not a lending rule. Lenders don’t size to it.
If the appraisal comes in below your cost after the window, the appraisal governs and the shortfall is real. A bridge loan sized on cost and ARV can leave a payoff gap against a cost-sized takeout. Run that comparison before you commit to the bridge, not after.
Exit Mechanics: Basis Also Shapes Release Pricing
Every property secures the same debt. Selling one door requires a release, and the release price runs above that property’s allocated balance. Lenders often derive the allocated balance from each property’s basis. So a door allocated on cost may release differently than one allocated on appraisal. Partial releases, substitutions and sales follow the loan documents, and the remaining pool must still cover its debt service. See Lendmire’s piece How a DSCR Lender Sizes a Blanket Loan Across LLC-Held Doors for more on allocation.
When Waiting Beats an Early Refinance
A blanket is best when you plan to hold. If you expect to sell, exchange or cash out individual doors, separate loans fit better.
Pooling rehabs before they season can lock cost-basis sizing onto the whole group. The alternatives are to wait for the window to pass or to close separate notes. Waiting makes sense when the appraisal is likely to exceed cost by a wide margin. An early blanket makes sense when the bridge is expiring and the cost-based amount still clears the payoff.
Back-solve your budget. If your all-in cost lands exactly at the cash-out ceiling, the file clears on paper but leaves no cushion for a soft appraisal.
Document Checklist by Door
- Purchase settlement statement and recorded deed date
- Invoices, receipts and bridge draw history
- Entity documents showing who holds title
- A lease for each property, or an appraiser-supported market rent
- Proof of deposit and first month’s rent where leases are new
Missing lease, deposit or first-month-rent proof is a common stall. Organize everything by property, not by project.
What Doesn’t Fit the Program
Owner-occupied property, co-ops, mixed-use and commercial property are ineligible in the pool. Manufactured and mobile homes are not reviewable on these programs. Small multifamily of five or more units is eligible only inside the rental portfolio term loan, a separate structure for five or more rental properties or units under one note. Its leverage tops out at 75% of value, and the cost-basis treatment there follows its own terms. Confirm how it applies to your file.
Also, “commercial DSCR” is a different measure. As Corporate Finance Institute explains, commercial lending uses cash flow over debt service. Residential portfolio DSCR runs rent against PITIA.
This article is general information, not legal or tax advice. Consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Does the clock run from deed recording or rehab completion?
Deed recording. Rehab completion and lease start don’t restart or shorten it. Properties bought on different dates can sit on different bases inside one pool.
Can one pool mix doors on different bases?
Yes. Each property gets its own value basis, so a recent rehab can be sized on cost beside a long-held door sized on appraisal. The results are summed into one pooled amount.
Does a rate-and-term refinance avoid the cost cap?
It isn’t subject to the cost-basis cap. A refinance that covers only the bridge payoff and closing costs is generally treated as rate-and-term. Leverage ceilings and coverage still apply.
Do renovation costs I paid in cash count?
They can, if you can document them with invoices, receipts and proof of payment. Spend without paper adds no borrowing room, and your own labor generally isn’t counted.
What if the appraisal comes in below my cost?
Once the appraisal governs, the lower number sizes the loan. Inside the window the cost cap and leverage ceiling still apply. Either way, the loan is the lower of the value test and the rent test.
If you are buying or refinancing rental properties and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. For another angle on structure, read Lendmire’s guide How to Wall Off Each House in an LLC-Held DSCR Blanket Loan. Program terms vary by lender. This is not a commitment to lend.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. IRS Publication 551, Basis of Assets
2. Corporate Finance Institute: Debt Service Coverage Ratio
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Structure Super Jumbo DSCR Financing for 20+ LLC Rentals · DSCR Refinance vs Paydown vs Sale on a Blanket Loan Due in 2 Years · How to Match a Non-Recourse LLC Portfolio to a 30-Year or Term DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.