Most of what you find when you search for this comparison is written by someone selling the loan. A DSCR lender tells you DSCR is the future; a mortgage broker tells you conventional is the only sane choice; almost nobody covers portfolio loans in the same breath because they are made by local banks that do not buy ads. The result is a lot of two-way fights and very little of the three-way decision a real landlord actually faces.
The honest framing is that these three are not competitors so much as tools for three different situations. Conventional is cheapest if you qualify the old-fashioned way. DSCR ignores your job and qualifies the property instead. A portfolio loan is whatever a bank willing to keep the note on its own books decides to make. Below is how each one underwrites, what it costs, and the specific landlord situation where it stops being the wrong answer and starts being the right one.
Conventional: the cheapest money you can qualify for
A conventional investment loan is the standard one-to-four-unit mortgage sold to Fannie Mae or Freddie Mac. It qualifies you, the person: lenders pull your credit, add up your debt-to-income ratio, and read two years of tax returns. The property has to appraise and you typically put 20 to 25% down, with down payment rising on two-to-four-unit buildings. In exchange you get the lowest rate of the three and a fixed 30-year term that never balloons.
The catch is the qualifying. Self-employed borrowers and landlords who write off depreciation and repairs often show low taxable income, and conventional underwriting reads that income, not your bank balance. The deductions that cut your Schedule E tax bill are the same ones that can sink a debt-to-income calculation. Lenders will add some depreciation back, but heavy write-offs still shrink the income they count.
The harder wall is the count. Fannie Mae limits a borrower to ten financed one-to-four-unit properties, including the home you live in, under guideline B2-2-03. Loans past the fourth get tighter reserves and pricing, and once you reach ten, conventional money for the next purchase is gone. That ceiling is the single most common reason a landlord who started with cheap conventional debt goes looking for something else.
DSCR: qualify on the rent, not your W-2
A DSCR loan skips your personal income entirely and underwrites the property's cash flow. DSCR stands for debt service coverage ratio, the property's annual net operating income divided by its annual debt payment; a ratio of 1.0 means rent exactly covers the mortgage and most lenders want 1.20 or better. No tax returns, no debt-to-income, no employment check. For the mechanics of the product itself, see DSCR loans explained.
Say you buy a duplex for $340,000, put 25% down, and the two units rent for $1,500 each. After taxes, insurance, and a vacancy and maintenance allowance, net operating income might land near $24,000 a year against a mortgage of roughly $20,000. That is a DSCR near 1.20, which most DSCR lenders will write. The same borrower might fail a conventional debt-to-income test if their tax returns show a thin number, yet sail through here because the building carries itself.
You pay for that flexibility. DSCR rates typically run higher than conventional, points are common, and many carry a prepayment penalty for the first few years. The two things that make it worth it: closings are faster because there is no income documentation to chase, and DSCR loans are non-QM products that do not count toward Fannie's ten-property limit, so they are the usual next step once conventional runs out.
Portfolio loans: whatever the bank will keep on its books
A portfolio loan is any loan the lender holds rather than selling to Fannie or Freddie. Because the bank keeps the risk, it also keeps the rulebook: it can underwrite however it likes, count rental income its own way, ignore the ten-property limit, and bundle several rentals under one note. These come from local and regional banks and credit unions, the kind where a relationship with a commercial lender matters more than a national rate sheet.
The flexibility is the whole point. A portfolio lender can look at a self-employed landlord, see the deposits and the rent rolls instead of the tax returns, and make a loan a Fannie seller never could. It can refinance five paid-off houses into one blanket loan to free up cash. It can write a deal on a property in rough shape that conventional and even DSCR underwriting would reject on condition.
The trade-offs are real. Portfolio loans often run shorter, commonly a balloon at five, seven, or ten years with a 20-to-25-year amortization underneath, so the payment is set for a long schedule but the loan comes due before it is paid off and you have to refinance. Rates are usually above conventional, terms vary by bank, and there is no standard product to comparison-shop. You are buying a relationship and a set of rules that fit your situation, not a commodity.
Matching the loan to your situation
The decision is less about the loans and more about how your income and your count look on paper. A few common cases:
- Clean W-2 income, under the limit. Conventional wins on price almost every time. Take the cheap fixed money while you still qualify for it, because the ten-property ceiling arrives faster than new investors expect.
- Self-employed or heavy write-offs. If depreciation and repairs crush your taxable income, DSCR sidesteps the debt-to-income problem by qualifying the property. A local portfolio bank that reads your deposits can do the same and sometimes beat the DSCR rate.
- Past the ten-property limit. Conventional is off the table. DSCR is the path of least resistance for a single property; a portfolio or blanket loan is worth a call if you want to combine several under one note.
- An odd property or a fast close. A building in poor condition, an unusual unit mix, or a deadline that conventional paperwork cannot meet pushes you toward DSCR for speed or a portfolio bank for judgment.
None of these is permanent. A common path is to buy with DSCR or a portfolio loan to get the deal done, season the property for a year, then refinance into cheaper money once the rent history and your numbers support it. The financing on a rental is a decision you remake every few years, not once.
The tax and ownership side every comparison skips
The loan you pick changes more than your rate. Conventional and DSCR loans are usually written to you personally, which raises the due-on-sale question if you later move the property into an LLC. Portfolio lenders are often more comfortable lending directly to an entity, which can matter for asset protection. And whatever you borrow, only the interest is deductible: the principal portion of every payment is just debt paydown, and lenders fold taxes and insurance into escrow, so a single mortgage payment hides three very different things.
That split is where the recordkeeping gets ugly, and it is the same regardless of which loan you chose. Tracking mortgage interest, principal, and escrow correctly is what keeps your NOI and cash flow honest, because principal and escrow do not belong in either one. For how all of this fits the larger funding picture, the financing guide for 1-10 unit landlords walks the whole sequence from first purchase to refinance.
Whichever loan you pick, the loan itself becomes a line you have to carry for years. I built rents.ai because spreadsheets kept dropping that line: it models a loan's balance and amortization and splits every recurring payment into deductible interest, principal paydown, and escrow, so the portfolio loans that never send a clean statement still land in your numbers correctly. What it will not do is shop the loan for you or pull a rate; it tracks the debt after you sign, not before. You can run the property's return through the cash-on-cash calculator to see how each financing choice changes the number before you commit.
Loan terms, the financed-property limit, and the tax treatment of mortgage interest are general descriptions, not advice on your deal. Confirm current guidelines with your lender and have your CPA review how a given loan structure affects your return before you sign.