DSCR Loan Property Inspection Checklist

DSCR Loan Property Inspection Checklist

A thorough property inspection protects your investment and prevents surprise costs that could destroy your DSCR ratio. While DSCR lenders don't require inspections as a loan condition (unlike FHA/VA loans), skipping one is a mistake that can cost thousands.

The Professional Inspection

Budget $400-$600 for a licensed home inspector. For investment properties, focus on these systems:

Structural Components

• Foundation — cracks, settling, water intrusion
• Load-bearing walls — sagging, bowing, cracking
• Roof structure — rafters, trusses, decking
• Floor joists — levelness, bounce, damage
• Basement/crawlspace — moisture, structural integrity

Red flag: Foundation cracks wider than 1/4 inch, horizontal cracks, or stair-step cracks in brick. These can cost $5,000-$30,000+ to repair.

Roof

• Age and remaining life (asphalt shingles: 20-30 years)
• Missing, curling, or damaged shingles
• Flashing around chimneys, vents, and valleys
• Gutters and downspouts — condition and drainage
• Evidence of leaks in attic (stains, mold, daylight)

Red flag: Roofs with less than 5 years of remaining life. Budget $8,000-$15,000 for replacement.

Plumbing

• Water pressure — test all faucets simultaneously
• Drain speed — slow drains indicate blockages
• Water heater — age, capacity, condition
• Supply line material — galvanized steel, copper, PEX, polybutylene
• Sewer line condition (recommend camera inspection for properties 30+ years old)
• Evidence of leaks under sinks, around toilets, in ceilings

Red flag: Polybutylene piping (gray plastic, common 1978-1995). Prone to sudden failure. Replacement: $5,000-$15,000.

Electrical

• Panel capacity — 100 amp minimum for modern use, 200 amp preferred
• Panel condition — no rust, double-tapped breakers, or Federal Pacific/Zinsco panels
• Outlet testing — GFCI in wet areas, grounded outlets throughout
• Wiring type — copper preferred; aluminum wiring (1965-1975) requires evaluation
• Visible wiring condition — no exposed or damaged wiring

Red flag: Federal Pacific or Zinsco electrical panels. Known fire hazards. Replacement: $2,000-$4,000.

HVAC

• Age of system (expected life: 15-20 years)
• Condition of furnace/air handler
• AC condenser — condition, refrigerant level
• Ductwork — condition, insulation, leaks
• Thermostat — functional, programmable
• Filter — clean, correctly sized

Red flag: HVAC systems over 15 years old. Budget $5,000-$12,000 for replacement.

Exterior

• Siding condition — rot, damage, peeling paint
• Windows — seals, operation, condensation between panes
• Doors — operation, weatherstripping, locks
• Grading — water should slope away from foundation
• Driveway/walkways — cracks, settling, trip hazards
• Fencing — condition, gates, property line accuracy

Interior

• Flooring — condition, levelness, moisture damage
• Walls and ceilings — cracks, stains, patches
• Kitchen — cabinets, countertops, appliances
• Bathrooms — tile, caulk, ventilation, toilet stability
• Smoke and CO detectors — present and functional
• Door and window operation

Additional Inspections to Consider

Sewer Camera ($150-$300)

Essential for properties over 30 years old. A camera inspection reveals root intrusion, line breaks, and bellying that a standard inspection can't detect. Sewer line replacement: $3,000-$15,000+.

Termite/Pest Inspection ($75-$150)

Look for active infestations and prior damage. Some DSCR lenders require a clear termite report. Treatment: $500-$2,500. Damage repair: highly variable.

Radon Testing ($150-$200)

Required in many states for real estate transactions. Mitigation systems cost $800-$1,500 if elevated levels are found.

Mold Assessment ($300-$600)

If the inspector notes moisture issues or visible mold, a professional mold assessment identifies the type and extent. Remediation: $1,500-$10,000+.

How Inspections Affect Your DSCR Loan

Appraisal Condition Requirements

DSCR appraisers note property condition issues that could affect habitability or safety. Significant problems may result in:

• Repair requirements — lender requires repairs before closing
• Reduced appraised value — defects lower the property's value
• Loan denial — if the property isn't in habitable condition

Cash Flow Impact

Every deferred maintenance item you discover before closing is a negotiation opportunity:

• Request seller repairs
• Negotiate a price reduction
• Get seller credits at closing for future repairs
• Walk away if repairs exceed your budget

Build repair costs into your maintenance budget and DSCR projections.

The Decision Framework

After receiving inspection results, categorize findings:

Deal breakers: Foundation failure, environmental contamination, structural damage exceeding 10% of purchase price

Negotiate: Roof replacement, HVAC replacement, plumbing updates (request price reduction or credits)

Budget for: Minor repairs, cosmetic updates, routine maintenance items

Ignore: Cosmetic issues that don't affect habitability or value

Ready to Make an Offer?

A clean inspection gives you confidence in your investment. A problematic one gives you negotiation leverage or a reason to walk away. Either outcome protects your investment.

Get pre-qualified for a DSCR loan →

For more due diligence guidance, see our guides on appraisal preparation and rent roll preparation.