Investor clients ask me the same two questions:
- How do I scale past 4 conventional investment properties?
- Where should I actually buy in Central Texas right now?
Let me answer both.
The Conventional Loan Ceiling
Fannie Mae and Freddie Mac cap you at 10 financed properties total (including your primary). But here's the catch — after property #4, the rules tighten significantly:
- Higher down payment required (usually 25% minimum)
- 6 months of reserves for EACH financed property
- Tighter DTI requirements
- Additional rate price adjustments
Most investors hit a wall around 3-4 properties not because they've run out of cash, but because their DTI ratio gets squeezed by all the added debt.
Enter DSCR Loans
DSCR (Debt Service Coverage Ratio) loans are the single biggest tool for scaling past the conventional limit.
How they work: The loan qualifies on the property's rental income, not your personal DTI.
The ratio: Monthly rent ÷ monthly PITIA. If rent is $2,200 and PITIA is $2,000, your DSCR is 1.10. Most programs want 1.0+ minimum; best pricing at 1.20+.
Key advantages:
- No personal income verification (no tax returns, no W-2s)
- No DTI calculation
- Count of financed properties doesn't matter
- Can use business entity (LLC) as borrower
Trade-offs:
- 20-25% down minimum
- Rate premium of 0.75-1.25% vs conventional
- Usually 30-year fixed but some programs have 5/1 ARM variants
- Pre-payment penalty common (2-5 year step-down)
DSCR is how you scale from 4 properties to 20. It's how experienced investors actually operate.
The Central Texas Market Right Now
Where I'd actually invest in April 2026:
Hays County (Kyle, Buda, San Marcos)
- Entry prices: $280-380K
- Rents: $2,000-2,600
- DSCR: typically 1.05-1.15 — tight but workable
- Why I like it: Still growing, near Austin spillover, good long-term appreciation
Williamson County (north of Round Rock)
- Entry prices: $320-420K
- Rents: $2,200-2,800
- DSCR: 1.10-1.20
- Why I like it: Suburban family rentals, good tenant quality, stable market
East Austin/South Austin (within city limits)
- Entry prices: $420-580K
- Rents: $2,400-3,200
- DSCR: Often UNDER 1.0 at current rates — not usually workable as pure rental
- Better strategy: Medium-term rental (2-6 month furnished, targeting corporate/medical)
Central San Antonio
- Entry prices: $180-280K
- Rents: $1,500-2,100
- DSCR: 1.15-1.30
- Why I like it: Best cash-flow metro in the state. Hospital/military employment base keeps rentals solid.
Waco
- Entry prices: $200-320K
- Rents: $1,600-2,200
- DSCR: 1.20-1.40
- Why I like it: Baylor + hospital employment, less speculative than Austin
The BRRRR Strategy in Texas
Buy distressed → Rehab → Rent → Refinance → Repeat.
Classic strategy, but Texas has specifics:
Section 50(a)(6) matters. Texas constitutional restrictions on home equity lending make cash-out refinances different here. Key rules:
- 80% LTV cap on cash-out
- 12-day cooling off period
- One cash-out every 12 months
The practical BRRRR timeline in Texas:
- Month 0: Buy distressed with hard money or cash
- Months 1-3: Rehab
- Month 4: Rent it out (need seasoning)
- Month 12: First cash-out refi eligible (Texas-specific 12-month rule sometimes)
- Some lenders allow delayed financing at 6 months post-purchase
If you're running BRRRR in other states you can recycle capital faster. In Texas, build a 12-month timeline model.
Reserves and Cash Flow Reality
Novice investor mistake: buying a property with "break-even cash flow" on paper.
Real rental operating costs people forget:
- Vacancy: 5-8% of annual rent even in a strong market
- Maintenance: 8-12% of annual rent on older properties
- Capital reserves (roof, HVAC, water heater): $150-300/month accrued
- Property management if you use one: 8-10% of collected rent
- Insurance hikes — Texas insurance has gone up significantly
- Property tax reassessment after you buy (Texas has strong rights here, but expect adjustments)
True cash flow isn't rent minus PITI. It's rent minus PITI minus 20-25% for operating expenses.
A "break-even" deal on paper is usually a losing deal in practice.
LLC Structuring
Most serious investors hold properties in LLCs. Three common setups:
1. One LLC per property. Maximum asset protection, maximum complexity. Good for 3+ property investors.
2. Series LLC (Texas-specific). Single parent LLC with protected "cells" per property. Cheaper to set up, still provides separation. Popular in Texas.
3. One LLC for all properties. Simple, but one lawsuit puts all properties at risk. OK for 1-2 properties.
DSCR lenders will lend to LLCs without personal guarantee in many cases — or with a limited PG. Have your CPA and attorney structure this before buying, not after.
The 5-Property Goal
A realistic first-investor roadmap for Texas:
Year 1: Buy property #1. Conventional investor loan, 20-25% down. Learn landlording. Year 2: Buy properties #2 and #3 using conventional loans. Build reserves. Year 3: Buy property #4 (last conventional). Start shopping DSCR lenders. Year 4: First DSCR purchase. Structure in LLC. Year 5: 2-3 more DSCR purchases. Refine your buy-box.
By Year 5 you have 6-7 properties generating real cash flow and appreciation.
When to Call
If you're in the planning phase: anytime. I'd rather we talk strategy before you buy than fix problems after.
If you're under contract: immediately. We can often save investor buyers real money on the loan side if they haven't locked terms yet.
If you're a seasoned investor wanting to refi into DSCR from conventional: yes, also immediately. We've restructured investor portfolios to free up DTI and enable more purchases.
Investor financing is a different animal from owner-occupied. Work with someone who does it weekly.