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Program 02
Rental / DSCR in Tennessee
Rental loans qualified on the property's income, not on yours.
A DSCR loan sizes to the rent, not to your tax returns. Up to 80% LTV, DSCR from 0.75, credit from 640, 30-year fixed or a 5, 7 or 10 year ARM, with flexible prepay structures. In Tennessee the lines that move your coverage ratio are the property tax class, the wind and hail deductible, and whether your entity qualifies for the FONCE exemption. Business-purpose only, and every structure is set in underwriting.
0.75
min DSCR
5.5%
rates from
30-yr
fixed avail.
80%
max LTV
Typical figures, subject to underwriting and market conditions. Not a commitment to lend.
How it works
No tax returns or personal income docs in most cases. We qualify on the property's cash flow, so you can scale your portfolio without the paperwork drag of conventional lending.
Who it's for
Buy-and-hold investors
Single rentals and portfolios
Short-term rentals considered
Rate/term and cash-out refi
Typical terms
Loan amount$100K to $3M
Max leverageUp to 80% LTV
DSCRFrom 0.75
CreditFrom 640
Term30-yr fixed / 5-7-10 ARM
RateFrom 5.50% IO*
PrepayFlexible structures
*Typical terms, subject to underwriting and market conditions.
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Local FAQ
Rental / DSCR in Tennessee, answered.
Does the FONCE exemption really get my Tennessee rental entity out of franchise and excise tax?
Sometimes, and the unit count is the hinge. Tennessee's family-owned non-corporate entity exemption relieves an LLC, LP or LLP from franchise and excise tax when at least 95 percent is owned by family members or qualifying trusts and at least 66.67 percent of receipts are passive investment income. For a rental investor the critical limit is this: residential rents qualify only from properties of four units or fewer, with no cap on how many such properties you own, and commercial rents do not qualify at all. Management fees generally disqualify, and a capital gain on a sale is non-passive in Tennessee regardless of federal treatment, so one disposition can blow the test for the year. A single-member family LLC can qualify. Form FAE183 is due by the 15th day of the fourth month, with a $200 penalty per late occurrence. Confirm it with your Tennessee CPA before you rely on it.
Do I owe Tennessee business tax on my rental income?
Generally not on long-term rentals, and yes on short-term. The Department of Revenue's position is that rentals of more than 180 consecutive days to one tenant are generally not subject to business tax. Short-term and vacation rentals are subject, and on top of that sales tax plus local occupancy taxes apply to stays under 90 days. That is a real difference in the operating expense line between a 12-month lease and a nightly rental, and it flows straight into the debt service coverage ratio we size your loan against. If you are underwriting a short-term rental, bring the tax remittance history, not just the gross booking revenue. Talk to your Tennessee CPA about your own filings.
How is my Tennessee rental assessed, and does the class matter?
It matters a lot, because Tennessee splits the assessment ratio. Under TCA 67-5-801 residential and farm property is assessed at 25 percent of value, while industrial and commercial is assessed at 40 percent. The same building at the same market value carries a 60 percent higher assessed base if it is classed commercial rather than residential, at the same rate. Note what we will not tell you: whether Tennessee classes a 5-plus-unit residential rental as commercial is not something we have a sourced answer for, and it is exactly the question a small multifamily buyer wants settled, so ask your county assessor for the classification on the specific parcel before you finalise the tax line. There is no state property tax; it is entirely a county and municipal levy, and inside a city a parcel pays both. For metro-level rates and market rents, see Nashville DSCR rental loans.
When can I appeal a Tennessee assessment, and what is the calendar?
Three tiers, and the first deadline arrives early. Start with an informal review with the assessor, within 10 days of the assessment notice or by June 1. Next is the County Board of Equalization, which convenes on or about June 1, and your window closes when that board adjourns, with the dates varying by county and by year. Above that is the State Board of Equalization, before August 1, or within 45 days of the county board's notice, whichever is later. Because the county dates move, check the current-year schedule with your county rather than reusing last year's. On a 30-year hold this is the one operating expense you can actually argue down, and a successful appeal improves the coverage ratio for the rest of the term.
What insurance assumption should I put in a Tennessee DSCR pro forma?
Budget the deductible, not just the premium. Tennessee's dominant perils are tornado, straight-line wind and hail, and wind and hail sit inside the standard homeowners form here rather than being carved out to a separate windstorm policy the way they are on the Gulf coast. But percentage wind and hail deductibles of roughly 1 to 5 percent of dwelling coverage are common, so a single hail claim can cost you several months of net operating income out of pocket. Tennessee also has no state FAIR plan and no insurer of last resort, so a vacancy between tenants or a heavy renovation pushes you to surplus lines. Flood exposure in Middle Tennessee is river and flash flood rather than coastal surge. Use a real quote for the specific address; we do not publish a Tennessee average premium because the published figures conflict badly.
Does Tennessee's lack of an income tax help my rental returns?
On the personal side, genuinely yes. On the entity side, read the fine print. The Hall income tax was repealed for tax years beginning on or after January 1, 2021, so there is no wage tax and no state capital-gains tax, which is real money for an out-of-state owner collecting Tennessee rent. What the headline hides is franchise and excise tax on the entity: excise at 6.5 percent of Tennessee net earnings and franchise at 0.25 percent of net worth, with a $100 minimum payable even by an inactive registered entity. Sole proprietors and general partnerships are outside it. Tennessee follows federal section 1031 and opportunity-zone deferral for excise purposes. Pair any of this with your Tennessee CPA before you file.
What credit score do I need for a Tennessee DSCR loan?
640 is the floor on this program. That is higher than our asset-based loans, which carry no minimum score, because a DSCR loan is a 30-year instrument rather than a 6-month one. The qualifying work is still done by the property: we size to the rent, with DSCR accepted from 0.75, so the lease and the market rent carry the file rather than your tax returns. There is no hard credit pull to start, and a stronger score generally buys better leverage and pricing rather than being a pass-fail gate above the floor. Subject to underwriting.
How much do I put down on a Tennessee rental, and what is the minimum loan?
20 percent down at the top of leverage, and $100,000 is the floor. We lend up to 80% LTV, so on a $400,000 Tennessee rental that is $320,000 from us and $80,000 from you (400,000 x 80% = 320,000), before closing costs. The loan range runs $100,000 to $3,000,000. Budget Tennessee's closing taxes into the cash to close as well: $0.37 per $100 on the deed and $0.115 per $100 of debt after the first $2,000. Terms run 30-year fixed or a 5, 7 or 10 year ARM, with flexible prepay structures. Subject to underwriting.
Can I get a Tennessee DSCR loan on my first rental?
Yes. A first rental is not a decline on this program. The loan qualifies on the property's income rather than on a landlord resume, so what we need is a lease or a supportable market rent, a credit score from 640, and an entity or personal file that can carry the closing. A thin track record typically shows up in leverage rather than in a yes or no. Bring a real tax and insurance quote for the specific parcel, because in Tennessee both lines move the coverage ratio more than new investors expect. Subject to underwriting.
More Rental / DSCR questions, answered on the program page
Resources
Guides for Rental / DSCR
Rental / DSCR · 5 min read
What Is a DSCR Loan? How Investors Qualify on Rental Income
Read the guide Strategy · 6 min read
Financing the BRRRR Method: Buy, Rehab, Rent, Refinance, Repeat
Read the guide Rental / DSCR · 5 min read
DSCR vs Conventional Loan: Which Is Better for Investment Property?
Read the guide Rates & Costs · 5 min read
Hard Money Loan Rates and Costs, Explained
Read the guide More in Tennessee
Other programs in Tennessee
Fix and FlipUp to 90% / 100% rehabGround-Up ConstructionUp to 70% LTV, most statesCRE BridgeUp to $10M, 24-36 moTransactional FundingSame-day double-close capitalBank Statement / No-DocNo tax returns requiredConventional InvestmentNon-owner-occupied investmentPortfolio LoansMultiple properties, one loanCRE PermanentLong-term agency & permSBA Financing7(a) & 504 placement
About the local figures on this page
Local rules move. Every tax rate, fee, ordinance and market figure here comes from a primary source and carries the date we read it, and we correct them as the rules change. Where a number is mid-change or we could not verify it, we say so rather than guess. Before you commit a budget, confirm anything that drives it with the city or county, and talk to your attorney or CPA on questions of law or tax.
Published by USA Mortgage Funding, LLC, NMLS #152588. Researched from primary sources by our team, drafted with AI assistance, and every figure checked against its source before publishing. Where an answer rests on a public record, that record is linked under it. Figures read on 2026-08-23.
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