The Quick Read: Open the line while the tenant is still in place, because the rent and the lease qualify the line, then draw from it, pay the tenant when the keys come back, and keep the paper trail. The strategy works mechanically, but the draw rules matter. At least 80% of the line must be drawn at closing, so the line is rarely sized to a buyout alone.
- The rent qualifies the line, not the owner’s personal income, and the minimum debt-service coverage ratio is 1.10x.
- A second lien reaches up to 70% combined loan-to-value (CLTV) at a 720 credit score or better. A first lien on a rental with no mortgage reaches up to 75% loan-to-value (LTV) at the top tier.
- A lease must be in place when the line is underwritten, so the line comes before the tenant conversation, not after.
- The minimum line is $50,000, which is usually far more than a buyout costs. The strategy fits best when the owner has other uses for the money.
What Cash for Keys Is and Why Landlords Use It
Cash for keys is a voluntary deal in which a landlord pays a tenant to leave by an agreed date. BiggerPockets describes the exchange this way: the landlord hands over cash, and the tenant hands back the keys, signs a release and removes their belongings. The theory is that paying the tenant costs less than going through an eviction.
That comparison has real numbers behind it. A BiggerPockets cost breakdown puts a full eviction at roughly $4,000 to $7,000 all-in, including lost rent, and at least $500 in legal fees for an uncontested case. The article is older, so treat those figures as illustrative rather than current. No reliable benchmark exists for a typical buyout amount. The number is negotiated, and it usually tracks what the eviction would otherwise cost in fees, vacancy and time.
An offer that is too low can backfire. The tenant is free to say no, and the landlord then needs a fallback plan. That fact shapes how much money the landlord should have borrowed before the first conversation.
What a DSCR HELOC Is, and What It Isn’t
A DSCR HELOC is a revolving line of credit secured by a rental the owner keeps. It is written as a standalone second lien behind the first mortgage the owner keeps, or as a standalone first lien on a rental with no mortgage. The structure described here is the one Lendmire, a mortgage broker, places through a wholesale network under its consumer licensing.
It is never a line on the owner’s own home or second home. It is never closed together with a purchase, and it is never a third lien. Rural property, condotels, row homes, leaseholds and land trusts sit outside it. Eligible property includes single-family homes, townhomes, planned unit developments, two-to-four-unit buildings and condominiums.
The line is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Eligibility, as always, is subject to underwriting.
Vesting in the owner’s LLC is allowed on this program, subject to lender program requirements. The members sign as guarantors, and a title holder who is not a borrower signs an acknowledgment and the security instrument. For a complete DSCR loans guide covering the broader family of rent-qualified products, start there.
How Underwriting Treats the Rent, Step by Step
The coverage test is where this product differs most from a bank line. The rental qualifies primarily on its own income, subject to lender guidelines. The file carries no traditional personal-income documentation, W-2s, pay stubs or debt-to-income ratio.
Here is how the test works.
1. Rent is established. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease in place is required.
2. The qualifying payment is built. The lender calculates a fully amortizing payment on the entire credit limit, not just the drawn balance. It uses the start rate plus 2 percentage points, which makes it a stress payment. Taxes and insurance are not part of it.
3. Coverage is measured. Gross monthly rent divided by that qualifying payment must reach at least 1.10x.
4. Vacancy is checked. A two-to-four-unit property may have at most one vacant unit.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in its coverage calculation. The lender’s own math governs every file, and all figures here are subject to underwriting.
The stress test on the whole line carries a consequence. A larger line needs more rent to qualify, even if the owner plans to draw only the minimum.
Leverage, Credit and What the File Needs
Leverage depends on which lien position the property can support, and the tiers are ceilings, not offers.
| Position | Credit tier | Maximum leverage |
|---|---|---|
| Second lien, lines to $500,000 | 720 or better | 70% CLTV |
| First lien, lines to $500,000 | 740 or better | 75% LTV |
| First lien, lines to $500,000 | 700 to 739 | 70% LTV |
| First lien, lines above $500,000 to $1,000,000 | 720 or better | 65% LTV |
CLTV means the first mortgage balance plus the new line, divided by value. A second lien has no cell below a 720 score. The first-lien rows apply only to a rental with no mortgage, so an owner who keeps a first mortgage looks to the second-lien row. Lines start at $50,000.
Other file points, typical across select programs and subject to underwriting:
- Mortgage history shows no 30-day late in the last 12 months.
- At least 48 months have passed since a bankruptcy, foreclosure, short sale or deed-in-lieu.
- No reserves and no cash to close are required.
- Exposure is limited to 5 loans or $2,500,000 per borrower with the program.
- Foreign nationals and ITIN borrowers are not eligible.
- A property listed for sale in the prior 2 months is ineligible.
Lines up to $400,000 use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines take a full interior appraisal. Appraisal waivers are not accepted.
Seasoning: Two Six-Month Clocks
A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date). An investor who just bought the building with the problem tenant in it cannot use this line for a buyout until both clocks run out.
The Draw Rule That Shapes the Whole Strategy
At least 80% of the line must be drawn at closing, and the closing draw is never less than $50,000. On the smallest lines, that means the whole line is drawn at closing. Later draws are at least $5,000 each.
The line carries a 5-year interest-only draw period on the drawn balance. A 25-year fully amortizing repayment period follows, with a 30-year maturity and a variable rate. The rate and pricing terms come with the lender’s HELOC disclosures.
Put those pieces together. A buyout is usually a small fraction of the minimum draw. The rest of the borrowed money starts costing interest on day one, whether or not it has a job.
This is the honest answer to the title. A DSCR HELOC can fund a cash-for-keys payment, but it makes the most sense when the owner has a plan for the remaining draw. Realistic uses include:
- Renovating the unit after the tenant leaves, so it re-leases at a higher rent.
- Covering carrying costs during turnover.
- Funding the next property’s down payment.
- Paying down higher-cost debt.
If the buyout is the only need, the structure is oversized for the job. Cash on hand, or a smaller closed-end loan, may serve better.
The Sequence: Line First, Tenant Second
The order of steps matters more than any single term. A lease must be in place when the line is underwritten, so the tenant stays until the line is open.
1. Landlord: run the break-even. Compare the likely buyout with eviction costs, lost rent and turnover time. A buyout that does not beat the eviction math is not worth borrowing for.
2. Landlord and broker: confirm eligibility. Check the title holding period, the leverage room, the credit tier, and whether the property type and state are eligible.
3. Lender: underwrite and close the line. The valuation, rent and credit are reviewed, and the draw happens at closing.
4. Landlord: park the draw. Move the funds into a dedicated account, and pay the tenant only from it. Tax treatment can depend on how the funds are used and how the property is held. Borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.
5. Landlord and tenant: sign the agreement. The agreement names the parties, the move-out date, the condition of the unit, key and fob return, and what happens to the security deposit. Shuk Rentals lists these elements and stresses that the tenant is free to refuse.
6. Landlord: pay on return of keys. Walk the unit, re-key it, then pay. A payment tied to the keys keeps the exchange clean.
7. Landlord: re-lease or reposition. Put the new lease in place, or begin the renovation that the remaining draw was meant to fund.
Before step 5, check local rules. Some rent-regulated cities add formal requirements. A California law firm summary describes Los Angeles as an example, with a notice before negotiating, a filing with the city and a 30-day right to cancel. An attorney familiar with the property’s jurisdiction should review the plan before any offer goes out.
Running the Numbers (Without Pretending to Know Yours)
Picture an owner of a duplex with a first mortgage at roughly half of the property’s value. Say one unit’s tenant is in arrears, and the owner wants the unit empty and renovated. The owner’s room under a 70% CLTV ceiling is about 20 points of value, which is the space the line can occupy.
Three questions decide whether the line makes sense.
1. Does the rent clear 1.10x against the stress payment on the whole line? If it does not, a smaller line or a different structure may fit.
2. Does the buyout plus the planned renovation beat the cost of waiting out an eviction? Count legal fees, lost rent and the turnover gap, as in the BiggerPockets breakdown above.
3. Can the property carry the interest-only payment on the drawn balance during turnover? The line’s payment is a real cost to the borrower even though it is outside the coverage test.
A line on one rental does not enter the coverage ratio of a different property. It still has to be paid from real cash flow, and an empty unit pays no rent. The break-even model should therefore include vacancy months, not only the buyout.
Where the Rule Breaks
The general sequence has exceptions, and each one changes the plan.
- Rented-out unit count. On a two-to-four-unit building, one vacant unit is the limit. A second vacancy during the buyout process would fall outside that standard.
- Recently bought or refinanced rentals. The two six-month clocks above apply. A buyer trying to clear a tenant right after purchase has a timing problem that this line cannot solve.
- First-mortgage crowding. If the first mortgage already uses most of the allowed 70% CLTV, no second-lien room remains. A paid-off rental has far more room.
- A credit score below 720 with a mortgage. The second-lien floor is 720, so a score in the 700 to 719 range does not qualify for this line. A different structure, such as a DSCR cash-out refinance, may be the next thing to look at.
- Ineligible properties. Rural-designated property, condotels, row homes, leaseholds and similar types are outside this lane.
- Tenant refusal. If the tenant says no, the borrowed money is already sitting in the account and costing interest. This is the best argument for opening the line only when the owner has another use for it.
- Eviction already under way. If the tenant is in default and the court process is moving, the buyout math changes, and the written agreement must address any pending filing.
- A planned sale. If the owner intends to sell, a listing in the prior 2 months makes the property ineligible, and a line may not be worth opening at all.
When It Fits and When It Doesn’t
| Situation | DSCR HELOC fit |
|---|---|
| Buyout plus a renovation or re-leasing plan | Strong fit |
| Buyout is the only need | Poor fit, oversized draw |
| Rental held in an LLC | Allowed, subject to program terms |
| Rental bought within the last 6 months | Not eligible yet |
| Owner needs a first-mortgage rate change | Different tool |
Alternatives for the Same Cash Need
Each alternative follows its own program’s rules, not this line’s.
| Option | How it is qualified | Best fit |
|---|---|---|
| Cash on hand | No loan | Buyout is small |
| DSCR HELOC | Rent on the property | Buyout plus other uses |
| DSCR cash-out refinance | Rent on the property | Rate or term reset needed |
| Bank HELOC on a rental | Owner’s income | W-2 borrower, no LLC |
Key Terms Defined
Cash for keys: A voluntary payment from a landlord to a tenant in exchange for a signed move-out and the return of the keys.
DSCR (debt service coverage ratio): Gross monthly rent divided by the qualifying payment, which must reach at least 1.10x on this line.
CLTV (combined loan-to-value): The first mortgage balance plus the new line, divided by the property’s value.
Standalone second lien: A line written behind the owner’s existing first mortgage, with no new first-mortgage loan alongside it.
Draw period: The 5-year window in which the drawn balance is interest-only before the 25-year repayment period begins.
Frequently Asked Questions
Can a DSCR HELOC be opened after the tenant has already left?
Usually not on the same terms. A lease in place is required when the line is underwritten, and a two-to-four-unit property may have at most one vacant unit. A single-family rental that is already empty has no lease to qualify on. Open the line first, while the tenant is still in place, then draw and pay.
Does a DSCR HELOC have a seasoning requirement?
Two six-month clocks apply: the line is not available on a rental bought or refinanced in the last 6 months (last note date to new note date), and title must have been held for 6 months (settlement date to note date). Both clocks matter for a landlord who just acquired a problem tenant with the building.
Can the LLC that owns the rental be the borrower?
Yes, subject to lender program requirements. Vesting in the owner’s LLC is allowed on investment property, the members sign as guarantors, and the borrowers on the line need not match the borrowers on the first mortgage.
How much of the line has to be drawn?
Most of the line is drawn up front, at no less than 80%, with a closing draw that is never below $50,000. Later draws are at least $5,000 each. The interest-only payment applies to the drawn balance, so a buyout-only plan means paying interest on money that is not working.
What if the tenant refuses the offer?
The tenant is free to say no, so the landlord needs a fallback, such as a higher offer, a different timeline or a formal eviction process. The line’s payment keeps running either way. That is why sizing the line to a purpose beyond the buyout matters.
Next Step
If you are considering a home equity line on a rental property and want to see how the numbers work, Lendmire can help you compare DSCR HELOC options based on the property, the rent, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183 or through the quote request page. Not a commitment to lend; every file is underwritten individually.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving landlords and real estate investors in 16 licensed states. DSCR home equity lines of credit on non-owner-occupied one-to-four-unit rentals are arranged through wholesale lending channels in 15 of those states (every licensed state except Tennessee); Lendmire brokers the line and the lender underwrites each application on the property’s rent, credit and leverage. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. BiggerPockets: Cash for Keys
2. BiggerPockets: How Much Will It Cost to Evict Tenants
3. Shuk Rentals: Cash for Keys Agreement for Landlords
4. Baghikian Law: Cash for Keys Buyout Agreements in California
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a DSCR HELOC Before Your Return Is Filed? · Can You Get a DSCR HELOC With a Cash-Heavy Business? · How Much Can You Borrow on a DSCR HELOC to Pay Off a Hard Money Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.