DSCR Calculator

DSCR (Debt Service Coverage Ratio) measures whether a property’s rental income is sufficient to cover its mortgage and operating obligations. Lenders use it to judge whether the property can carry its own loan, and some will lend on it with no personal income documentation at all.

There are two versions in use, and they can give opposite answers on the same property. Commercial lenders and bank portfolio loans use the NOI (Net Operating Income) version below, which this calculator computes. The residential “DSCR loans” sold to small landlords usually skip NOI entirely: they divide gross monthly rent by the full PITIA payment (Principal, Interest, Taxes, Insurance and any HOA dues), and many accept 1.0 or a little less. Fill in the optional taxes-and-insurance box and the panel shows both.

Core formula:

DSCR = Net Operating Income (NOI) ÷ Annual Debt Service

Where:

• Net Operating Income (NOI) = Gross Rental Income − Vacancy Loss − Operating Expenses
• Annual Debt Service = 12 × Monthly Mortgage Payment (principal + interest only, since taxes and insurance already sit in the operating expenses)

NOI formula:

NOI = (Gross Rent × 12) × (1 − Vacancy Rate) − Annual Operating Expenses

Operating expenses (typical for rental property):

• Property management: 8–10% of gross rent
• Maintenance/repairs: 5–10% of gross rent
• Insurance: 0.5–1.5% of property value
• Property taxes: per local rate
• Capital expenditure reserves: 5–10% of gross rent
• Total OpEx: typically 35–50% of gross rent (the “50% rule” for estimation)

What each variable means:

• DSCR > 1.0: income exceeds debt service; property cash-flows positively
• DSCR = 1.0: income exactly covers debt; zero cash flow surplus (break-even)
• DSCR < 1.0: income insufficient; owner must cover the shortfall from other sources

Lender DSCR requirements (NOI version):

• Minimum DSCR for loan approval: 1.20–1.25× (most commercial lenders)
• Preferred DSCR: 1.30–1.50× (better rates, lower down payment)
• Some lenders allow DSCR 1.0 with a larger down payment or higher rate

Worked example:

Investment property: $350,000 purchase, 25% down ($87,500), loan $262,500 at 7.5% for 30 years.

Monthly payment = $1,835 → Annual debt service = $22,025
Gross annual rent = $2,400/month × 12 = $28,800
Vacancy (8%) = −$2,304
Operating expenses (45%) = −$12,960
NOI = $28,800 − $2,304 − $12,960 = $13,536

DSCR = $13,536 ÷ $22,025 = 0.61, well below 1.0. No commercial lender would touch it on these numbers. Either the rent must increase significantly or the loan must shrink.

Now run the same house past a residential DSCR lender. Say taxes are $300 a month and insurance $100, so the full payment is $1,835 + $400 = $2,235. Rent ÷ PITIA = $2,400 ÷ $2,235 = 1.07, which clears the 1.0 many of them accept.

Same property, opposite verdict. The NOI version is the honest one about cash flow, since it counts vacancy, repairs and management that the rent ÷ PITIA ratio ignores. So ask a lender which formula they use before you run the numbers, and do not mistake their approval for proof the property makes money.