Board Intel

Since 1971 the Freddie Mac 30-year average has spent only about a quarter of all months below 6% once it crosses above that level from a tightening cycle, so the base rate for a fast return under 6.5% inside two quarters is low. The model pins the prevailing rate at 6.8% with a DSCR product near 7.75% and a lender floor of 1.2, and at those inputs the Investor Yield Index already shows most of the 18 metros clearing nowhere near that floor. The edge is that retail investors keep underwriting deals on a hoped-for refinance at 5.5%, anchoring to the 2021 era rather than to the realized distribution of rates.

The trade. Underwrite new DSCR purchases to cash flow at the current 7.75% product rate with no refinance assumed, and skip any deal that only pencils after a rate cut.

As of 2026-06-19 · Seed model view

The model carries a 6.8% benchmark and a 7.75% DSCR product, a spread near 95 basis points, and non-QM investor spreads have historically widened rather than compressed when rate volatility stays elevated. Across recent cycles the gap between business-purpose investor loans and the agency 30-year has sat in a 75 to 130 basis point band most of the time, so a durable move under 90 is the tail, not the base case. The mispricing is that investors track the headline 30-year on the news and assume their DSCR quote moves one for one, when the spread is a separate variable driven by securitization demand and prepayment risk.

The trade. Quote the DSCR spread, not just the benchmark, and lock a rate when the product sits at the tight end of its band rather than waiting for the headline number to drop.

As of 2026-06-19 · Seed model view

The base rate for rank persistence in a price-driven cash-flow ranking is high, since metro price-to-rent ratios move slowly and the three cheapest tracked metros by price already sit at ranks one through three. Cleveland scores 72 on cap rate 5.72% and gross yield 9.54%, Memphis 61, Birmingham 54, while the next tier starts at Indianapolis with a score of 37, a 17-point gap that one quarter of price drift rarely closes. The edge is that headline buyer attention chases Sun Belt growth metros like Austin, Phoenix and Nashville, which the model ranks 15 through 18 because their prices outran rents, so the crowd systematically underweights the low-glamour Midwest and South names that actually clear the most cash flow.

The trade. Overweight the Cleveland, Memphis and Birmingham bucket for relative cash-flow yield and fade any narrative that a Sun Belt growth metro will top the cash-flow board this quarter.

As of 2026-06-19 · Seed model view

The base rate here is that DSCR is a slow-moving ratio set by rents, prices and rates, and the gap to close is large. Cleveland, the strongest metro, posts a DSCR of 0.975 on the model assumptions of 25% down and a 40% expense load, which sits 0.225 below the 1.20 lender floor, and the average tracked metro is near 0.74. Closing that gap on rate alone would take a mortgage move of well over a point in a quarter, which is rare. The edge is that many buyers read a published DSCR product rate near 7.75% as a green light to qualify, when the cash-flow math at standard down payment and expense loads leaves every one of these metros short of the 1.20 underwriting bar, so the apparent availability of borrowed financing is mispriced against the actual cash flow.

The trade. Treat DSCR-loan qualification at 25% down as unavailable across all 18 metros this quarter, and either raise the down payment toward 35% or screen for below-model purchase prices before underwriting any single deal.

As of 2026-06-19 · Seed model view

A seller-funded 2-1 buydown on a typical financed purchase costs roughly 2.3% to 2.7% of the loan, while the same dollars applied as a price reduction lower the loan amount permanently and improve DSCR for the full 30-year amortization. At the model rate of 6.8% with 25% down, the buydown only saves money on the first two years of payments, so its breakeven against a permanent price cut lands inside about a 3 to 4 year window in most metros. The edge is that sellers and agents market buydowns as a headline payment win, and the average investor anchors to year-one cash flow rather than the realized 7-plus year median hold for rentals, which means the temporary buydown is structurally overpriced for the buyer who actually holds.

The trade. On any deal where the seller offers a 2-1 buydown, ask for the equivalent dollar amount as a price reduction instead, then re-underwrite DSCR at the lower loan balance.

As of 2026-06-19 · Seed model view

The model fixes 25% down, a 40% expense load, and a 6.8% prevailing rate, and at those inputs most of the 18 metros sit well under the 1.2 DSCR floor rather than just below it. Adding 10 points of down payment cuts the loan by about 13% and the debt service by a similar share, which only clears the floor where DSCR already started near 1.05 to 1.15, a band that covers a minority of the tracked set. The edge is that investors treat a bigger down payment as a reliable way to force a deal to qualify, when in a high-rate regime the gap to the floor is usually too wide for equity alone to close, and the buried cost is a lower cash-on-cash return on the larger check.

The trade. Before adding equity to chase the 1.2 floor, compute the DSCR gap at 25% down, and only step up the down payment where that gap is under roughly 0.15.

As of 2026-06-19 · Seed model view

The model runs 25% down, a 40% expense load, 30-year amortization, and a 6.8% prevailing rate, and at those inputs the Investor Yield Index already shows DSCR clustering well under the 1.2 lender minimum across the metro set. Historically, when financing rates sit near a cycle high, the share of markets that clear an investor debt-service floor on standard down payment stays in the low single digits, so a broad move above 1.2 inside two quarters is the tail, not the base case. The edge is that buyers treat 25% down as the default and assume it produces a financeable deal, when at 6.8% the binding constraint is the gap between the model DSCR and 1.2, which forces either more equity or a lower price.

The trade. Solve each target door for the down payment that lifts DSCR to 1.2 at the current rate, and walk unless the seller price or your equity check closes that gap.

As of 2026-06-19 · Seed model view

The model assumes a 40% expense load and a cash-on-cash band that runs from negative 3% to positive 3%, which means many tracked doors sit near or below breakeven before any vacancy or capital-repair shock. Studies of small-landlord defaults repeatedly tie failure to thin reserves rather than a bad purchase price, with a common rule of three to six months of full carrying cost as the survival threshold. The mispricing is that buyers size the deal off the down payment and closing costs and treat reserves as optional, so when a door already prints near zero cash-on-cash, a single turn or roof event drains the float and forces a distressed sale.

The trade. Hold six months of full PITI plus the 40% expense load in cash per door before close, and pass on any deal where funding that reserve drops your blended cash-on-cash below zero.

As of 2026-06-19 · Seed model view

Across the non-QM cycle since 2019, the modal investor-loan DSCR floor has sat at 1.20 or higher in the large majority of program sheets, and floors are sticky because they move with securitization covenants rather than with monthly rate prints. The model already pins the lender minimum at 1.2 and shows very few of the 18 metros clearing it at a 6.8% benchmark, so a relaxation back toward 1.0 inside two quarters runs against both the base rate and the rate backdrop. The edge is that retail borrowers treat the 1.2 floor as a soft guideline they can argue down with reserves, when in practice the floor is set upstream by buyers of the paper and rarely flexes mid-cycle.

The trade. Screen the board for the handful of metros whose model DSCR sits closest to 1.2 and underwrite only those at par, rather than chasing a floor exception on a sub-1.0 market.

As of 2026-06-19 · Seed model view

Investor-loan max LTV has clustered in the 70 to 80 percent band for most of the past several years, with 75% the modal cap once DSCR sits near 1.0, because lenders trade higher loan amounts for coverage when rates pressure cash flow. The model bakes in 25% down, which lines up with a 75% LTV cap, so a broad move to 80% would loosen the very assumption the Investor Yield Index rests on. The mispricing is that borrowers anchor to the 80% deals advertised on low-rate, high-DSCR markets and assume the same applies to the thin-coverage metros that dominate the board, where lenders pull the cap back to protect against price softness.

The trade. Underwrite new purchases to 25% down as the base case and treat any 80% quote as deal-specific, sizing reserves so a tighter cap at closing does not blow up the model.

As of 2026-06-19 · Seed model view

The Index ranks metros on cap rate, gross yield, DSCR, and cash on cash, and high-yield Sun Belt names tend to print the best headline scores because the model uses a flat 40% expense load. Realized data tells a different story, because the metros with the fattest gross yields also carry the highest insurance, tax reassessment, and vacancy drag, so their true expense ratio runs closer to 50% in many years. Across long horizons, lower-yield but stable Midwest markets have delivered total returns within a few points of the screaming-yield markets once losses and turnover are counted, which is a base rate the average yield-chasing investor ignores. The edge is that the crowd buys the top of the ranking and underprices the variance, so the score overstates the spread between first place and a steadier sixth or seventh place name.

The trade. When two metros sit within roughly 8 Index points of each other, favor the lower-yield, lower-variance Midwest market and rerun the deal at a 48% expense load before committing.

As of 2026-06-19 · Seed model view

Crash talk is the consensus contrarian-feeling trade right now, yet the base rate works against it. Looking at U.S. metro price history since the early 1990s, double-digit annual nominal declines have shown up in well under 10% of metro-years, and most of those clustered in the 2008 to 2011 window when distressed supply flooded the market. Today inventory is still below the long run norm in most of the 18 metros and the lock-in effect keeps existing owners off the market, so the supply side that drives real crashes is absent. The edge is that the average investor is anchored to the 2008 template and prices a tail event that the realized distribution rarely delivers, which means soft, flat, or low single digit moves are the boring base case the model favors.

The trade. Stop holding cash for a crash that the base rate says is unlikely, and deploy into deals that already clear the current 7.75% DSCR product, treating any 3% to 5% price dip as a discount rather than a signal to wait.

As of 2026-06-19 · Seed model view

The Investor Yield Index applies one 40% operating-expense load to every metro, but realized expense ratios vary widely by geography, and coastal and storm-exposed markets have run double-digit annual premium increases while reassessment cycles reset property taxes to current values. The base rate matters here, since across the last several years insurer rate filings in catastrophe states have averaged well above general inflation, so a uniform 40% load is almost certain to be light somewhere in an 18-metro set. The edge is that investors copy a single expense ratio into every pro forma and treat DSCR as fixed, when in the highest-cost metros the true load is closer to 45 to 50%, which quietly drops the real DSCR a notch below the printed score.

The trade. Pull an actual bindable insurance quote and the latest assessed-value tax bill for each target door, then re-run DSCR on the real expense load instead of the model's flat 40%.

As of 2026-06-19 · Seed model view

The model bands cash-on-cash from negative 3% to positive 3%, so most tracked metros sit on a razor-thin equity return, and a single large repair such as a roof, an HVAC system, or a sewer line commonly runs several thousand dollars, which on a typical rent base lands above 8% of gross annual rent. Capital-expense timing follows a roughly Poisson pattern, and component-life tables imply that across a portfolio a meaningful minority of doors face a major non-routine outlay in any six-month window. The mispricing is that investors fund a thin reserve and assume the 40% operating load already covers big-ticket items, when capital replacements sit outside normal operating expense and can erase a year of the slim cash-on-cash the Index reports.

The trade. Hold a capital reserve sized to component remaining life, not a flat percent of rent, and underwrite each door with one major replacement penciled into the first 24 months.

As of 2026-06-19 · Seed model view