Financing · 7 min read
Agency vs Bridge vs DSCR: Choosing the Right Debt for the Plan
The wrong loan can kill a great real estate deal. A plain-English guide to matching financing to your business plan and hold period.
By Yuriy Blat ·
Debt is the most under-appreciated variable in real estate investing. Two identical deals with different loans can produce wildly different outcomes. Here's how I think about matching the loan to the business plan.
Agency debt (Fannie / Freddie)
Long-term, fixed-rate, non-recourse debt for stabilized multifamily 5+ units. If the asset is already performing and you plan to hold 7–10 years, this is often the best-in-class option. Trade-off: prepayment penalties are real and inflexible.
Bridge debt
Short-term (usually 12–36 months), floating-rate, higher leverage. Designed for value-add plans where you need capital to reposition an asset before refinancing into agency. Trade-off: rate cap costs, extension fees, and refinance risk if rates or the plan slip.
DSCR loans
Common for small residential rentals and 1–4 unit portfolios. Lender qualifies the property's cash flow, not your personal income. Trade-off: higher rates than agency, and terms vary widely between lenders.
The matching rule
Match the loan term to the business plan. If you plan to reposition in 18 months and refinance, don't take a 10-year fixed loan with prepay. If you plan to hold for 10 years and let time do the work, don't finance it with a two-year bridge.