DSCR Loans in Colorado for Commercial Investors Now

Why Colorado’s Commercial Investors are Turning to DSCR Loans in 2025

Colorado’s commercial real estate market is surging in 2025: The state registers a year-over-year commercial property value increase of 8.2%, with Denver, Boulder, and Colorado Springs topping investment charts. Vacancy rates in Denver’s industrial sector have dropped to 4.6%—well below the 2025 national average of 6.1%—while average commercial rental rates in prime submarkets like LoDo and Tech Center climb past $38/SF. In this competitive environment, Debt Service Coverage Ratio (DSCR) loans are empowering investors to scale portfolios without traditional income verification hurdles.

Colorado Commercial Real Estate Market Overview (2025)

• Denver Metro: Office vacancy 13.2% (down 1.1% year-over-year), triple-net average asking rent $30/SF.
• Boulder: Tech and flex spaces outperforming, 7% rent growth, 97% occupancy in life sciences sector.
• Colorado Springs: Retail cap rate ~6.7%, warehouse listing prices up to $175/SF.
• Statewide Rental Yields: Commercial assets averaging 6.4% gross yields, with some value-add deals exceeding 7.1% in ZIPs like 80918 and 80014.

Population growth: Colorado added 64,000 new residents in 2024, with the state’s pro-business climate fueling continued demand. Unemployment holds below 3.4%. Key drivers include tech expansion, aerospace investments, and the I-25 North Corridor improvement (projected to cut freight times by 13%).

Understanding DSCR Loans for Colorado Commercial Properties

• How DSCR Loans Work: Instead of personal income, lenders qualify borrowers based on the property’s income vs. debt payments.
• DSCR Ratios: Most Colorado lenders require a minimum DSCR of 1.20–1.30 for commercial properties. Higher DSCR means stronger cash flow and easier approval.
• Loan-to-Value (LTV): 65–75% LTV is typical for DSCR loans on Colorado commercial real estate in 2025.
• Interest Rates: Current DSCR rates for commercial in Colorado range from 7.0% to 8.5%, depending on property type, location, and borrower experience (as of Q2 2025).

Why Use a DSCR Loan in Colorado?

Need capital? GHC Funding offers flexible funding solutions to support your business growth or real estate projects. Discover fast, reliable financing options today!

Test Your Expertise: The Complexities of the 1031 Exchange

As a sophisticated real estate investor, you understand that the 1031 Exchange is a cornerstone strategy for tax deferral and wealth accumulation. But beyond the basics, the intricacies of the 1031 Exchange rules can pose significant challenges. This quiz is designed to test your in-depth knowledge and highlight critical nuances that separate casual investors from true experts in 1031 Exchange transactions.

Instructions: Choose the best answer for each question.

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Page 1 of 5

Question 1: Understanding "Like-Kind" in a 1031 Exchange

Which of the following scenarios most likely qualifies as a like-kind property exchange under IRS Section 1031, allowing for 1031 Exchange tax deferral?

a) An investor exchanges a portfolio of publicly traded REIT stocks for a commercial retail building. b) An investor exchanges their primary residence, used for personal living for 15 years, for a duplex intended for rental income. c) An investor exchanges raw land held for appreciation in Texas for a stabilized apartment complex in Florida, both held for investment. d) An investor exchanges a classic car collection (personal property) for a single-family rental home (real property).

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Question 2: Navigating the 45-Day Identification Period for a 1031 Exchange

An investor sells a multi-family property on June 15th for a 1031 Exchange. According to the strict timelines, by what date must they identify their replacement properties to comply with the 1031 Exchange requirements?

a) July 30th of the same year, as the 45-day period includes weekends and holidays. b) August 29th of the same year, allowing for an extra 45 days if needed. c) December 12th of the same year, aligning with the 180-day completion period. d) January 1st of the following year, if they plan to file for an extension.

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Question 3: The Role of a Qualified Intermediary (QI) in a 1031 Exchange

Why is the engagement of a Qualified Intermediary (QI) absolutely critical for the validity of a 1031 Exchange?

a) The QI provides investment advice and helps the investor choose the best replacement property for their 1031 Exchange strategy. b) The QI acts as a liaison with the IRS, directly negotiating tax liabilities related to the 1031 Exchange process. c) The QI holds the proceeds from the relinquished property's sale, preventing the investor from having "constructive receipt" of funds, which would invalidate the 1031 Exchange. d) The QI provides legal and tax advice to ensure the 1031 Exchange is perfectly compliant

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Question 4: Understanding "Boot" and its Impact on a 1031 Exchange

An investor sells a commercial building with $500,000 in equity for a 1031 Exchange. They purchase a replacement property for $450,000, effectively reducing their debt by $50,000. What is the tax implication of this scenario within the 1031 Exchange framework?

a) The entire 1031 Exchange is disqualified because the investor "traded down" in value. b) The $50,000 in reduced debt is considered "boot" and will be immediately taxable as partial gain in this 1031 Exchange. c) There are no immediate tax implications, as the primary goal of the 1031 Exchange is only about the "like-kind" nature of the properties. d) The investor can defer the $50,000 as long as they pay off other personal debts with the funds, still qualifying for a full 1031 Exchange.

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Question 5: Advanced 1031 Exchange Strategies & Flexibility

An investor aims to sell a highly appreciated single-tenant retail property and replace it with multiple smaller, diversified multi-family units to spread risk. Which of the following 1031 Exchange identification rules best allows for this diversification strategy, maintaining eligibility for a 1031 Exchange?

a) The "Three Property Rule," where the investor can identify up to three properties of any value, regardless of the relinquished property's value, for their 1031 Exchange. b) The "200% Rule," allowing identification of any number of properties, provided their aggregate fair market value does not exceed 200% of the relinquished property's value for the 1031 Exchange. c) The "95% Rule," which states that if more than three properties are identified, the investor must acquire at least 95% of the aggregate value of all identified properties to qualify for the 1031 Exchange. d) All of the above are valid identification rules within a 1031 Exchange, offering flexibility for various investment strategies.

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The Ultimate DSCR Loan for Rental Property Quiz

Are you looking to expand your real estate investment portfolio? A DSCR loan might be the perfect tool to help you achieve your goals without relying on traditional income documentation. Test your knowledge with this quiz to see if you're ready to master the intricacies of a DSCR loan for rental property.

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Page 1 of 5

What is the primary factor a lender considers when approving a DSCR loan for rental property? A) The borrower's personal income and debt-to-income (DTI) ratio. B) The borrower's credit score and employment history. C) The property's potential rental income compared to its monthly expenses, known as the Debt Service Coverage Ratio. This is the key metric for a DSCR loan for rental property eligibility and approval. D) The total value of the borrower's existing investment properties and personal savings.

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How does a DSCR loan for a rental property differ from a conventional mortgage for a personal residence? A) A conventional mortgage requires a DSCR calculation, whereas a DSCR loan for a rental property does not. B) A DSCR loan for a rental property primarily focuses on the property's cash flow, allowing investors to qualify without traditional income verification, unlike a conventional mortgage which is based on personal income and liabilities. C) A conventional mortgage has a higher interest rate and stricter requirements than a DSCR loan for a rental property. D) A DSCR loan for a rental property is only available for commercial properties, not residential rental properties.

Page 3 of 5

What is an ideal Debt Service Coverage Ratio (DSCR) for a lender when evaluating a DSCR loan for a rental property? A) A DSCR of 0.75, indicating the property generates 75% of the income needed to cover its debt service. B) A DSCR of 1.00, meaning the property's income exactly equals its debt service. C) A DSCR of 1.25 or higher, as this indicates the property's income is greater than its expenses, making it a strong candidate for a DSCR loan for a rental property and providing a buffer for unexpected costs. D) A DSCR of 2.00, which is the standard minimum for all investment properties, regardless of location or market conditions.

Page 4 of 5

Which of the following expenses are typically included in the calculation of the Debt Service Coverage Ratio for a DSCR loan for a rental property? A) The property's mortgage payment (principal and interest), property taxes, and insurance, which are the core components used to determine if the property can support the debt. B) The property's mortgage payment, property taxes, insurance, and the borrower's personal credit card debt. C) The property's monthly rental income and all utility bills, regardless of who pays them. D) Only the principal and interest payment of the loan, as other expenses are not considered in a DSCR loan for a rental property calculation.

Page 5 of 5

Who would most benefit from using a DSCR loan for a rental property? A) A first-time homebuyer with a W-2 salary and a high debt-to-income ratio, who is looking to purchase a primary residence. B) A seasoned real estate investor with multiple properties who wants to expand their portfolio without using personal income to qualify, making a DSCR loan for a rental property the ideal financing solution for their needs. C) Someone looking to finance a primary residence with a low down payment and a government-backed loan. D) An individual with a very low credit score who cannot qualify for any other type of loan.

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• No personal income or employment verification required
• Close faster—many DSCR deals fund in as little as 21 days
• Works for LLCs and non-traditional ownership structures
• Accepts short- and long-term commercial leases as qualifying income
• Flexible prepayment options available

Property Type Analysis: Colorado Commercial Opportunities

Office Spaces in Tech Corridors

• Broomfield (ZIP 80021): Class B office building, 12,000 SF listed at $2.6M, leased at $31/SF NNN
• Annual rental income: $372,000 // Estimated DSCR: 1.38

Industrial/Warehouse Investments

• Aurora (80014): 16,000 SF industrial property priced at $1.78M, leased at $13/SF (annual: $208,000)
• Estimated DSCR: 1.32 with 70% LTV ($1.246M loan at 7.2%)

Retail Strip Centers

• Colorado Springs (80918): 9,000 SF center, 95% leased, cap rate 6.5%, purchase price $2M
• Net income: $130,000/year, strong downtown employment drivers

Mixed-Use Ventures

• Longmont (80501): 7-unit corner retail/residential at $1.4M, monthly gross rent $13,700
• Potential DSCR: 1.27 with conservative expense modeling

Top Colorado ZIP Codes for Commercial DSCR Investment in 2025

• 80216 (Denver/RiNo): Industrial/creative, rents up 10%, new light rail stop
• 80014 (Aurora): Industrial/flex, proximity to Buckley SFB, 6.8% average cap rates
• 80918 (Colorado Springs): Mix of retail/office, close to University of Colorado, cap rate 6.5%
• 80021 (Broomfield): Office/tech corridor, Ball Aerospace expansion, Class A absorption
• 80301 (Boulder): Biotech/lab, rental demand at all-time highs
• 80501 (Longmont): Mixed-use development, Amazon warehouse impact
• 80203 (Denver/Capitol Hill): Retail/office mix, close to new state office campus, $38/SF retail rents

Neighborhood & Economic Drivers

• RiNo/LoDo (Denver): Robust foot traffic, creative spaces, S&P Global offices opening Q3 2025
• Boulder: CU Boulder expansion, tech start-ups surge, Google campus employment rising
• Colorado Springs: Aerospace & defense—Northrop Grumman hub hiring 900+ in 2025

Infrastructure Developments

• I-25 North Corridor: $350M in upgrades boosting distribution logistics
• Aurora Line light rail extension opening Q2 2025
• Boulder Junction: New housing/retail centers spurring mixed-use demand

DSCR Lender Landscape in Colorado

• Kiavi: National DSCR lender, recently closed $14M in Colorado commercial loans, offers 75% LTV to experienced borrowers, rates from 7.0%
• RCN Capital: Quick-close DSCR solutions, recent deals in 80216 and 80918, flexible on net lease retail, rates from 7.65%
• Lima One Capital: Specialized in mixed-use assets, 3-year interest-only options, rates 7.8–8.3%
• Finance of America Commercial: In-state lending team, unique step-down prepayment, 5–30 year amortizations
• FirstBank (CO-based): Local expertise, portfolio DSCR loans available, competitive rates for larger projects
• BridgeWell Capital: Nationwide reach, DSCR for retail anchored and light industrial, minimum DSCR 1.20

Lender Advantage Comparison

• Local lenders like FirstBank understand zoning/infrastructure impacts and can tailor terms for projects tied to local economic drivers.
• National lenders (e.g., Kiavi) offer streamlined approval, higher leverage for repeat borrowers, and rapid-close options—ideal for Denver and Boulder deal flow.

Lending Trends

Colorado DSCR approvals up 26% YoY as of Q1 2025. Over 42% of all new commercial investment purchases in the state now utilize DSCR/non-QM loans.

Step-by-Step DSCR Application Process for Colorado Investors

1. Prequalify: Share property type, location, and lease/rent roll info with lender.
2. DSCR Calculation: Lender reviews leases and projected income against proposed loan payments (P&I + taxes/insurance).
3. Submit Offer: Secure PSA/contract for your commercial property; earnest money deposit as required.
4. Application Package: Complete lender’s online or PDF application (LLC/title docs, lease summaries, business formation info).
5. Order Appraisal & Site Inspection: Lender orders third-party MAI appraisal specific to asset type and ZIP.
6. Lease Verification: Provide copies of all active leases, estoppel certificates if requested.
7. Underwriting Review: Lender reviews income, expense statements, DSCR calculation, title and insurance documentation.
8. Approval & Closing Disclosure: Loan approval with terms locked, closing statement sent for review.
9. Closing: Coordinates with title company/attorney; wire funds, record deed, finalize investor contribution.
10. Funding: Lender disburses funds—often within 21–35 days from application start to funding.

Required Documentation Checklist

• Executed purchase contract/LOI
• LLC/Corporation formation docs
• Current rent rolls, lease agreements
• Year-to-date and trailing 12 income/expense statements
• Property management and insurance certificates
• Borrower experience & REO schedules (if applicable)

Timeline & Approval Challenges

• Timeline: Standard DSCR commercial deals close in 3–6 weeks.
• Common Challenges:
• Low DSCR on variable rent leases: Address by showing signed long-term lease extensions or boosting occupancy before closing.
• Inadequate property management/reserve budgets: Provide detailed pro forma, management plan.
• Zoning overlays (esp. Boulder): Use local counsel to demonstrate conforming use and present any municipal approvals/permits.

Colorado Commercial DSCR: Success Story & Calculations

Example: An investor purchases a 12,000 SF industrial flex property in 80021 Broomfield at $2.5M. Current net operating income (NOI): $184,500. Takes a DSCR loan at 70% LTV ($1,750,000 principal) at 7.5% fixed for 30 years. Annual P&I payment: $146,965.

• DSCR: $184,500 / $146,965 = 1.26
• Annual Cash Flow: $37,535 post-debt service
• Projected 5-year value (assuming 4% annual appreciation): $3,042,000
• Potential IRR (if sold in year 5): 12.4% (unleveraged) / 18.9% (leveraged)

✅ Small Business Resources 

• SBA – Small Business Administration
  https://www.sba.gov

• SCORE Mentors (Free Mentoring & Workshops)
  https://www.score.org
• Small Business Development Centers (SBDC)
  https://americassbdc.org

Are You an SBA Real Estate Loan Expert?

Test your in-depth knowledge on using SBA Loans for owner-occupied commercial Real Estate acquisition. These questions delve into the critical details that can impact your business's growth and financial strategy.

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Page 1 of 5

For an existing commercial property, what is the minimum owner-occupancy percentage required for an SBA 7(a) real estate loan, and does this specific scenario qualify?

A manufacturing company plans to acquire a 30,000 sq ft industrial real estate facility using an SBA 7(a) Loan. The company initially needs 18,000 sq ft for its operations and intends to lease out the remaining 12,000 sq ft.

A) 60%; Yes, it qualifies. B) 51%; Yes, it qualifies. C) 75%; No, it does not qualify. D) 60%; No, it does not qualify, as they are leasing out a portion.

Page 2 of 5

Which of the following sets most accurately represents additional cost categories that can typically be financed within an SBA 504 Loan for a commercial real estate project?

Hint: Beyond the straightforward purchase of a commercial real estate property, an SBA 504 Loan is highly effective for comprehensive projects.

A) Business inventory, working capital, and employee salaries. B) Building renovations, long-term machinery essential to operations within the property, and soft costs like architectural fees. C) Advertising expenses, short-term equipment leases, and utility deposits. D) Personal real estate investments, vehicles for personal use, and stock market investments.

Page 3 of 5

Between an SBA 7(a) Loan and an SBA 504 Loan, which program generally offers the lowest typical borrower down payment for a commercial real estate acquisition, and what is that common minimum percentage for established businesses?

A highly profitable professional services firm in a competitive market wants to purchase its office real estate with minimal upfront capital. The firm's owners prioritize cash flow and liquidity.

A) SBA 7(a) Loan; 15% B) SBA 504 Loan; 10% C) SBA 7(a) Loan; 5% D) SBA 504 Loan; 20%

Page 4 of 5

For new construction, what is the initial minimum owner-occupancy percentage required, and what is the maximum timeframe to meet the full owner-occupancy threshold, for an SBA Real Estate Loan?

A fast-growing tech startup plans to construct a new 50,000 sq ft headquarters using an SBA Loan. They will immediately occupy 35,000 sq ft and have a definitive plan to occupy the remaining 15,000 sq ft within two years as their team expands.

A) Initial 51%, full 80% within 5 years. B) Initial 60%, full 80% within 3 years. C) Initial 75%, full 100% within 1 year. D) Initial 51%, full 100% within 2 years.

Page 5 of 5

What is this crucial requirement, and what fundamental principle does it underscore for the lender?

When securing an SBA Loan for a commercial real estate purchase, principal owners with a 20% or greater ownership stake are almost universally required to provide a specific type of assurance beyond the collateral of the real estate itself.

A) A fixed-rate interest payment commitment, demonstrating long-term stability. B) A first-lien position on all personal assets, ensuring full recovery. C) A personal guarantee, signifying the owners' personal commitment to loan repayment. D) A business plan with projected revenue growth of at least 15% annually, showing future viability.

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Timing Note: Properties closing in Q2–Q3 2025 may benefit from lower DSCR rates as Fed signals possible cuts; waiting until late 2025 could mean higher acquisition competition and price inflation, so decisive action is recommended.

Key Takeaways & Next Steps

• Colorado’s commercial DSCR loans offer fast, flexible access to high-potential assets—especially in key tech, industrial, and mixed-use corridors.
• Loan programs are tailored to capture local economic drivers: tech growth in Boulder, logistics in Aurora, aerospace in Colorado Springs.
• Whether you’re an in-state or out-of-state investor, DSCR loans provide a streamlined, income-doc-free path to portfolio growth.

✅ Real Estate Investor Resources

• AirDNA (Short-Term Rental Data)
  https://www.airdna.co

• Rentometer (Rent Comps)
  https://www.rentometer.com
• Zillow Research & Data
  https://www.zillow.com/research

DSCR Loan IQ Quiz!

Test your knowledge of Debt Service Coverage Ratio (DSCR) loans!

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Page 1 of 3

What is the primary factor a lender focuses on when approving a DSCR loan for an investment property? a) The borrower's personal debt-to-income (DTI) ratio b) The property's ability to generate enough income to cover its mortgage payments c) The borrower's credit score history over the past 10 years d) The total number of investment properties the borrower already owns

Page 2 of 3

If a property has a Net Operating Income (NOI) of $5,000 per month and its total monthly debt service (PITI) is $4,000, what is its DSCR? a) 0.8x b) 1.0x c) 1.25x d) 5.0x

Page 3 of 3

Which type of borrower most commonly benefits from using a DSCR loan? a) First-time homebuyers purchasing a primary residence b) Investors with a strong W-2 income and minimal tax deductions c) Self-employed individuals or those with complex income who want to avoid traditional income verification d) Homeowners looking to refinance their primary residence for a lower interest rate

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Ready to secure your next Colorado commercial property using a DSCR loan? Start by connecting with a lender that specializes in your target market. Have vacancies filled, lease terms clear, and property financials organized for the smoothest approval process. The 2025 market is rewarding investors who move quickly—capitalize on this window before heightened demand pushes up prices and compresses cap rates further.

Have questions?

• Contact us for a tailored DSCR loan quote for your target ZIP
• Bookmark this guide—2025 lending guidelines and market trends are updated quarterly
• Join our Colorado commercial investor newsletter for hot new DSCR-approved opportunities

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