DSCR Calculator for Rental Property
DSCR — Debt Service Coverage Ratio — is the single number lenders look at first when financing an investment property. It tells them (and you) whether the property earns enough to cover its loan payments. Here's exactly how it works and how to calculate it for any deal.
What is DSCR?
DSCR is your property's net operating income (NOI) divided by its annual debt service (the total of your mortgage principal and interest). A DSCR of 1.0x means the property earns exactly enough to pay its loan — no cushion. Most lenders want 1.20x–1.25x or higher, meaning the property earns 20–25% more than the loan costs.
The DSCR formula
DSCR = Net Operating Income ÷ Annual Debt Service
Net operating income is your effective rental income minus operating expenses (taxes, insurance, management, maintenance, vacancy) — but before the mortgage. Annual debt service is your monthly principal-and-interest payment times twelve.
A quick example
A property nets $18,000 in NOI per year and the mortgage costs $15,000 per year. DSCR = 18,000 ÷ 15,000 = 1.20x. That clears most lenders' minimum, with a modest safety margin.
Why it matters to you, not just the bank
A higher DSCR means more breathing room if rents dip or expenses spike. A DSCR below 1.0x means the property loses money every month — a clear warning sign before you buy.
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