DSCR Calculator
DSCR (debt service coverage ratio) measures whether a property earns enough to cover its loan payments: net operating income divided by annual debt service. A DSCR of 1.25x means the property generates 25% more income than it owes the lender each year. It is the first number most rental-property lenders check when underwriting a loan.
Annual debt service: $39,918
DSCR: 1.50x
Strong coverage
The formula
DSCR = Net Operating Income ÷ Annual Debt Service
Net operating income (NOI) is rental revenue minus operating expenses — before loan payments, capital expenditures, and income taxes. Annual debt service is twelve months of principal and interest on the loan.
Worked example
- A rental property produces $60,000 of NOI per year.
- Its $500,000 loan at 7.0% over 30 years costs $3,327/month — $39,922 of annual debt service.
- DSCR = $60,000 ÷ $39,922 = 1.50x.
At 1.50x coverage this property comfortably clears the threshold most lenders look for, leaving headroom for vacancies or rate increases.
Most rental-property lenders look for a DSCR of roughly 1.20x–1.25x or higher; below 1.0x the property does not cover its own debt payments.
Frequently asked questions
- What is a good DSCR for a rental property?
- Most lenders want to see roughly 1.20x–1.25x or higher. A DSCR of 1.0x means the property exactly covers its debt payments with nothing to spare; below 1.0x the owner is paying the difference out of pocket.
- Is DSCR calculated before or after taxes?
- Before. DSCR uses net operating income, which excludes loan payments, depreciation, capital expenditures, and income taxes. Property taxes and insurance, however, are operating expenses and do reduce NOI.
- How do I improve a low DSCR?
- Either raise NOI (increase rents, reduce operating expenses, cut vacancy) or reduce annual debt service (larger down payment, longer amortization, lower rate via refinance). Small NOI changes move DSCR more than most people expect.
- What is a DSCR loan?
- A loan underwritten primarily on the property’s own income (its DSCR) rather than the borrower’s personal income. Investors with strong properties but complex personal finances often use them; rates are typically somewhat higher than conventional mortgages.
Run the whole deal, not just one number
The free rental property analyzer calculates DSCR, cap rate, cash-on-cash, and cash flow together from one set of inputs — no signup required.
Analyze a deal free