DSCR Loans in North Dakota: Investor's Guide to Rental Property Financing

North Dakota may not be the first state that comes to mind for real estate investing, but it offers unique opportunities—especially for investors seeking high cash flow and economic stability. The state's economy is driven by energy, agriculture, and military presence, creating consistent rental demand in key cities like Fargo, Bismarck, and Grand Forks.

For investors looking to finance rental properties in North Dakota, DSCR (Debt Service Coverage Ratio) loans provide a streamlined option that doesn't require traditional income documentation. This guide walks through everything you need to know about DSCR loans in North Dakota, including requirements, the best markets, and state-specific considerations.

What Is a DSCR Loan?

A DSCR loan qualifies you based on the property's rental income rather than your personal income. This makes it ideal for self-employed investors, those with multiple properties, or anyone who wants to avoid the hassle of providing W-2s and tax returns.

The DSCR formula: DSCR = Monthly Rental Income ÷ Monthly Debt Obligations (PITI + HOA)

• DSCR of 1.25: Property generates 25% more income than its monthly expenses (strong)
• DSCR of 1.0: Property breaks even
• DSCR of 0.8: Property operates at a 20% shortfall (you cover the gap)

Most lenders prefer 1.0 or higher, though programs exist down to 0.75 DSCR with larger down payments.

North Dakota Rental Market Overview

North Dakota has a smaller population than most states, but it offers stability and economic resilience that many larger markets lack.

Key market statistics:

• Median home price (statewide): $285,000
• Average single-family rent: $1,400–$1,900/month
• Population: 779,000 (concentrated in Fargo, Bismarck, Grand Forks, Minot)
• Rental vacancy rate: 6.8% (moderate)
• Property tax rate: 0.98% average (moderate)
• Key economic drivers: Energy (oil, natural gas), agriculture, military (Air Force bases), healthcare, education

North Dakota's economy is less volatile than pure energy states (like Wyoming) due to diversification into agriculture, healthcare, and education. The state has low unemployment, stable rents, and affordable housing—ideal for cash-flow investors.

DSCR Loan Requirements in North Dakota

Minimum DSCR Ratio

• 1.0+: Standard programs with competitive rates
• 0.8–0.99: Available with 25–30% down and higher rates
• Below 0.8: Very limited options

Down Payment

• 20–25% for most properties
• 25–30% for DSCR below 1.0 or multi-family (3–4 units)
• 30%+ for properties in smaller towns or rural areas

Credit Score

• Minimum 640 for most lenders
• 680+ for best rates
• 720+ can unlock lower down payment options (15–20%)

Property Requirements

• 1–4 unit residential investment properties
• Single-family homes, townhomes, duplexes, multi-family
• Must be non-owner-occupied (investment property)
• Property must be in good condition (no major rehabs)

Loan Limits

• Typical range: $75,000–$1,000,000
• Conforming limit (2026): $766,550
• North Dakota properties rarely exceed conforming limits

Documentation

• Purchase contract or property appraisal
• Lease agreement (if occupied) or market rent analysis
• Hazard insurance quote
• Proof of reserves: 6 months PITI
• No tax returns, W-2s, or employment verification required

Best Cities for DSCR Loan Investment in North Dakota

1. Fargo

North Dakota's largest city and most diversified economy.

• Median home price: $310,000
• Average rent: $1,650/month (3-bedroom)
• Population: 270,000+ metro
• Why invest: North Dakota State University, Microsoft campus, healthcare (Sanford Health, Essentia), stable job market, strong rental demand
• Best neighborhoods: South Fargo, West Fargo, Downtown Fargo

Typical DSCR scenario: $300,000 purchase, $1,600/month rent, 25% down = DSCR ~1.08

2. Bismarck

State capital with government and energy jobs.

• Median home price: $320,000
• Average rent: $1,600/month
• Population: 135,000+
• Why invest: State government employment (recession-resistant), energy sector, stable economy, low unemployment
• Best areas: North Bismarck, Mandan (adjacent city)

Typical DSCR scenario: $310,000 purchase, $1,550/month rent, 25% down = DSCR ~1.04

3. Grand Forks

College town on the Minnesota border.

• Median home price: $265,000
• Average rent: $1,400/month
• Population: 105,000 metro
• Why invest: University of North Dakota (largest in the state), Air Force base, affordable entry point, student housing demand
• Best neighborhoods: Near UND campus, South Grand Forks

Typical DSCR scenario: $255,000 purchase, $1,350/month rent, 25% down = DSCR ~1.10

4. Minot

Air Force base city in northern North Dakota.

• Median home price: $275,000
• Average rent: $1,450/month
• Population: 78,000+
• Why invest: Minot Air Force Base (stable military housing demand), oil industry proximity, consistent rental income
• Best areas: South Minot, near the base

Typical DSCR scenario: $265,000 purchase, $1,400/month rent, 25% down = DSCR ~1.08

Note: Minot is more volatile due to energy sector exposure. Military housing provides stability.

5. Williston (Higher Risk, Higher Reward)

Oil boom city in western North Dakota.

• Median home price: $290,000
• Average rent: $1,600/month (can spike during oil booms)
• Population: 30,000+
• Why invest: Oil and gas industry, high rental demand during booms, strong yields
• Risk factor: Rent and demand fluctuate with oil prices

Typical DSCR scenario: $280,000 purchase, $1,550/month rent, 30% down = DSCR ~1.10

Warning: Williston is cyclical. Only invest if you understand the energy market and can handle vacancies during downturns.

Property Types That Work for DSCR Loans in North Dakota

Single-Family Homes (Most Common)

• 3-bedroom, 2-bath homes in $250,000–$350,000 range
• Strong demand from families and military personnel
• Easiest to finance and manage

Duplexes and Multi-Family (2–4 Units)

• Excellent for DSCR because multiple rental incomes boost the ratio
• Common in Fargo, Grand Forks, and Bismarck
• Expect 25–30% down payment

Townhomes

• Popular in Fargo and Bismarck
• Watch for HOA fees—they reduce DSCR
• Good for low-maintenance rentals

Short-Term Rentals (Limited Market)

• Very limited STR market outside of tourist areas (Theodore Roosevelt National Park region)
• Most North Dakota rentals are long-term
• Some lenders count 75% of projected STR income if documentation is strong

North Dakota Tax Considerations for Rental Property Investors

Property Taxes

North Dakota's average property tax rate is 0.98%—moderate compared to national averages. This is higher than neighboring South Dakota (0.85%) but lower than Minnesota (1.08%).

Examples:

• $300,000 property in Fargo: ~$2,940/year ($245/month)
• $265,000 property in Grand Forks: ~$2,597/year ($216/month)

Property taxes are manageable and don't significantly hurt DSCR calculations.

State Income Tax

North Dakota taxes rental income at 1.1% to 2.9% (progressive rates), one of the lowest state income tax structures in the U.S.

Tax-friendly features:

• Low rates reduce your overall tax burden
• Standard deductions apply: mortgage interest, depreciation, property taxes, repairs, management fees

No State Transfer Tax

North Dakota does not charge a state-level real estate transfer tax, saving you money at closing.

Homestead Exemption (Not for Investors)

North Dakota offers property tax relief for primary residences, but not for investment properties. You won't benefit from this as a landlord.

1031 Exchanges

North Dakota follows federal 1031 exchange rules. Defer capital gains taxes by reinvesting proceeds into another investment property.

Landlord-Friendly Environment

North Dakota is moderately landlord-friendly:

• Eviction process averages 30–45 days
• No rent control laws
• Security deposits capped at 1 month's rent
• Landlords can charge for damages and unpaid rent

Interest Rates and Costs for North Dakota DSCR Loans

As of early 2026:

Interest Rates

• 1.25+ DSCR: 7.25%–8.0%
• 1.0–1.24 DSCR: 7.75%–8.5%
• 0.75–0.99 DSCR: 8.5%–9.5%

Expect rates 1–2 points higher than conventional owner-occupied mortgages.

Closing Costs

• Origination fee: 1–2%
• Appraisal: $500–$700 (can be higher in rural areas)
• Title insurance: $1,500–$2,500
• Attorney fees (optional): $500–$1,000
• No state transfer tax
• Total closing costs: 2.5–4% of purchase price

Reserves Required

• 6 months PITI for most properties
• 9–12 months for higher-risk markets (Williston, smaller towns)

How to Maximize Your DSCR in North Dakota

1. Target Fargo and Grand Forks for Stability

These cities have diversified economies (universities, healthcare, tech) that reduce risk. They also offer better rent-to-price ratios than Bismarck.

2. Buy Multi-Family Properties

A duplex or triplex in Fargo can generate $2,800–$3,500/month in rent, significantly boosting DSCR compared to single-family homes.

Example:

• Single-family in Fargo: $300K, $1,600/month = DSCR 1.08
• Duplex in Fargo: $350K, $2,700/month = DSCR 1.35

3. Focus on Military and University Housing

Properties near Minot Air Force Base or UND in Grand Forks have consistent demand and lower vacancy rates.

4. Increase Down Payment in Energy Towns

If investing in Williston or other oil-dependent areas, put down 30–35% to cushion against income volatility and ensure your DSCR stays above 1.0 during downturns.

5. Use Conservative Rent Estimates

North Dakota rents are stable but not rapidly growing. Use current market comps—don't project 5–10% annual increases.

Working with North Dakota DSCR Lenders

National DSCR Lenders

Companies like Visio Lending, Lima One, and Kiavi operate in North Dakota, though they may have stricter guidelines for smaller markets.

Regional Lenders and Credit Unions

Some North Dakota-based lenders offer portfolio loans with DSCR-style underwriting. These can be more flexible for properties in smaller towns.

Mortgage Brokers

A broker with North Dakota experience can help you navigate lenders willing to work in secondary markets like Minot or Grand Forks.

Tip: Some national lenders avoid energy-dependent markets like Williston. Ask upfront if the lender has restrictions on specific cities.

Common Mistakes to Avoid

1. Overestimating Rent in Small Towns

Don't assume Fargo rent comps apply to smaller cities like Dickinson or Jamestown. Always use local comps for accurate DSCR calculations.

2. Ignoring Energy Market Volatility

Williston and western North Dakota are tied to oil prices. If you invest there, budget for vacancies and rent decreases during energy downturns.

3. Skipping Inspections in Cold Climates

North Dakota winters are brutal. Check furnaces, insulation, roof condition, and foundation integrity. Deferred maintenance is expensive in harsh climates.

4. Underestimating Vacancy Rates

North Dakota's statewide vacancy rate (6.8%) is higher than hot growth markets. Budget for 1–2 months of vacancy per year.

5. Buying Properties Without Market Research

North Dakota is not a high-growth market. Focus on cash flow and stability, not rapid appreciation. Buy in cities with job diversity (Fargo, Grand Forks) rather than single-industry towns.

Frequently Asked Questions

Can I use a DSCR loan in Williston or other oil towns?

Yes, but expect stricter requirements (higher down payment, larger reserves) due to market volatility. Some lenders may decline loans in energy-dependent areas.

Do I need to be a North Dakota resident?

No. DSCR loans are available to out-of-state investors. You don't need to live in North Dakota or have a North Dakota LLC.

How long does it take to close a DSCR loan in North Dakota?

Typically 25–40 days. Rural appraisals can take longer due to limited comparable sales data.

Can I use projected rent if the property is vacant?

Yes. Lenders will order a rent appraisal to determine fair market rent, which is used in the DSCR calculation.

Are there any cities I should avoid in North Dakota?

Avoid small towns with declining populations (rural areas losing residents to Fargo/Bismarck). Stick to the main metros (Fargo, Bismarck, Grand Forks, Minot) for best long-term stability.

The Bottom Line

North Dakota won't deliver the rapid appreciation of markets like Austin or Phoenix, but it offers something many hot markets don't: stability, cash flow, and low competition.

Key takeaways:

• Best for cash-flow investors seeking stable, predictable returns
• Fargo and Grand Forks offer the best combination of rental demand and diversified economies
• Low state income tax (1.1–2.9%) and no transfer tax reduce costs
• Moderate property taxes (0.98%) don't significantly hurt DSCR
• Energy markets (Williston) offer higher yields but higher risk
• Expect DSCR of 1.05–1.15 with 25% down in major metros

DSCR loans make it easier to invest in North Dakota without the hassle of traditional income verification—ideal for self-employed investors or those with multiple properties. The state's economy is steady, unemployment is low, and rental demand is consistent in the major cities.

If you're looking for a low-drama, cash-flowing market with minimal investor competition, North Dakota deserves a closer look. Just focus on Fargo, Bismarck, and Grand Forks, avoid overextending in energy towns, and run conservative numbers.

North Dakota real estate isn't flashy—but it pays the bills.