Case Study: A Coastal Vacation Rental Priced $106,000 Past What the Numbers Support

By Steve Waller · October 22, 2026

The deal

A pre-approval request came in through the website for a single-family house in a coastal city near a major U.S. metro area. The plan was a $725,000 purchase, about $90,000 of updates, and then a DSCR refinance so the house could run as a vacation rental. The investor put the after-repair value at $950,000 to $975,000 and called that conservative. The goal was to put as little cash in up front as possible. The price was already agreed in the investor's head. The numbers came after.

The numbers, the ACP way

Every file here gets sized the same way: ARV times the advance rate, less repairs, less closing costs, less the purchase price. What's left is the cash due at closing. The advance is never written above what the file needs, so there's no surplus on a purchase. We used the top of the investor's own range, $975,000, which flatters the deal, and closing costs of about $22,000.

At a 70% advance the loan is about $683,000. Take out $90,000 of repairs, $22,000 of closing and the $725,000 price, and the investor brings $154,000 to closing.

At a 75% advance the loan is about $731,000 and the cash due drops to $106,000.

Turn the same math around and you get the price the deal supports: about $571,000 at 70% and $620,000 at 75%. The asking price is $105,000 to $154,000 above that. At $620,000 the 75% advance covers purchase, repairs and closing on its own, and the investor brings nothing but reserves.

Flip vs rent

As a flip at $725,000: sell at $975,000, pay about $68,000 to sell, around $40,000 of interest over a six-month hold and about $15,000 of taxes and insurance while it sits. The profit is roughly $15,000 on about $161,000 of the investor's cash. One soft appraisal or one extra month wipes it out.

As a flip at $620,000: same sale, same costs, and the profit is closer to $120,000. Same house, bought $105,000 cheaper.

As a rental, which was the actual plan: a DSCR lender at 75% of $975,000 writes about $731,000. That pays off the bridge loan and nothing more, so the roughly $161,000 the investor put in stays in the house. At an illustrative 7.5% DSCR rate, with about $1,750 a month in taxes and $750 in insurance, the payment runs about $7,600 a month. That's the rent the property has to average just to break even on coverage, about $91,000 a year, before cleaning, platform fees and management. To show a lender a comfortable 1.20 coverage it's closer to $9,100 a month. If the rental income can't carry that, the investor is paying to own a beach house with $161,000 parked in it.

What should have happened first

The investor should have run the numbers before getting into the hard money loan, not after. Ten minutes on the Deal Estimator at acp-lending.com would have shown the $106,000 cash due and the $620,000 supported price before an offer went in. The DSCR Calculator would have shown the $7,600 rent the takeout needs, which is the question that decides a vacation-rental plan. And the Free Deal Check would have flagged both, plus the gap between the cash needed and the cash on hand.

This is where an adviser earns his keep. A lender looking at this file as submitted sees a price the value doesn't support, a borrower short on cash, and a rental exit nobody has tested. Nobody competes for a file like that, so it gets declined or priced for the risk.

What to do on yours

Start with the exit. If it's a rental, find out what rent the DSCR loan needs before you agree a price, and check it against what the house will really earn. Then size the purchase so ARV times 70% to 75% covers price, repairs and closing, and walk away above that number. Show your liquidity and your reserves up front. A file that's priced right, with a tested exit and cash on the table, is one lenders compete for, and that's where the better terms come from.

Run your own deal through the Deal Estimator, the DSCR Calculator or the Free Deal Check at acp-lending.com, or send it to me and I'll structure it with you before you sign anything.

The full report, and every earlier one, is available on ACP's website at acp-lending.com. Investors can sign up at acp-lending.com/investor-brief to receive new reports by email.

Market data is from public sources and is provided for information only. Nothing here is an offer of credit, a rate quote, or investment advice. Financing is subject to underwriting, lender approval, appraisal or valuation, title, insurance, property eligibility and program availability.

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