Here is a simple example just to illustrate:- Invest in Syndication 1 in Year 1 for $100,000, realize $60,000 depreciation- Invest in Syndication 2 in Year 2 for $100,000, realize $50,000 depreciationThere are typically distributions that would use up some of the depreciation losses, but ignoring them here for simplicity (I have many deals that have created a lot of losses).- Syndication 1 exits in Year 3 for $150,000.

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

Three percent isn’t a rule, it’s just one specific example someone used to illustrate the structure.Second, you’re not “joined at the hip” with the buyer.

Here’s a successful one that recently wound up that illustrates that we need to move beyond the simple to structure deals with maximum wealth building. 5 + years ago I came across a property with 2 retail/warehouse buildings.  

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

To try to illustrate better, in theory at leastProperty 1 pays $250 a month and then on average $50 a month in the 20% markups, totaling $300 for the monthProperty 2 pays $250 a month and then on average $150 a month in 20% markups, totaling $400 for the monthThats $700 total for the month In the scenario where they don't charge the markups but instead charge a higher price to achieve the same revenue:Property 1 pays $350 flat Property 2 pays $350 flatSo in theory, property 1 is paying $50 more because the company needs to hit their revenue for doing the work of maintenance for both properties. 

This illustrates compound growth.  

The process we follow is illustrated below.Summarizing the illustration: Once the relinquished property is under contract and all contingencies have passed, place the replacement properties under contract—but don't close on them until after the relinquished property closes.

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

A recent deal closing of ours will, I believe, illustrate this well: We put together a land deal that closed recently.