Commercial Property

Commercial property is real estate held to produce income rather than to live in: apartment buildings, offices, retail, industrial and hospitality. Investment property is the asset class DSCR underwriting applies to, because the property's income, not the owner's, is what repays the loan.

In lending, the line between residential and commercial falls at five units. One to four unit rentals are financed with residential products, including DSCR loans, on 30-year terms. Five or more units, and all non-residential property, use commercial mortgages with shorter terms and NOI-based coverage tests.

The DSCR loan brings commercial logic to the residential side. A single-family rental is treated as a small income property: its rent is measured against its payment, and the borrower's personal income does not enter the decision. That is why DSCR loans can close in an LLC and why the property must be non-owner-occupied.

Further reading: Commercial Property on Wikipedia.