DSCR Calculator
Calculate the debt service coverage ratio — net operating income divided by debt payments — that lenders use to size property loans.
How it works
DSCR = net operating income ÷ annual debt service · Passes if DSCR ≥ lender minimum · Max debt service = NOI ÷ minimum DSCR
The debt service coverage ratio tells a lender whether a property earns enough to pay its own loan. A DSCR of 1.0 means income exactly equals the debt payment — no margin for error — so lenders demand a cushion, commonly 1.20 to 1.25, meaning income must exceed the payment by 20–25%. Below 1.0 the property cannot cover its debt from operations. DSCR loans are popular with investors because they qualify the property’s cash flow rather than the borrower’s personal income.
Worked example
A building produces $60,000 of net operating income and has $48,000 of annual mortgage payments. DSCR is 60,000 ÷ 48,000 = 1.25×, exactly meeting a 1.25× lender minimum. At that minimum the property could support up to $48,000 of debt service, so there is no room to borrow more without raising income.
Frequently asked questions
What is a good DSCR?
Most commercial and DSCR-loan lenders look for at least 1.20–1.25×, meaning income exceeds debt payments by 20–25%. Stronger deals show 1.35× or higher, which gives a buffer for vacancy and rising expenses and often earns better loan terms.
What if my DSCR is below 1.0?
A ratio under 1.0 means the property’s income does not cover its debt payment, so it would need cash from your pocket each month. Lenders will generally decline, or require a larger down payment (which lowers the loan and its payment) to lift the ratio above their minimum.
Does DSCR use gross or net income?
It uses net operating income — rent after operating expenses like taxes, insurance, maintenance and management, but before the mortgage. Using gross rent would overstate coverage; the whole point is to measure income available to service debt.
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Educational estimate, not financial or investment advice. Real returns depend on financing, local costs and market conditions.