What Is DSCR?
DSCR stands for Debt Service Coverage Ratio. It tells you how many times a property's cash flow covers its mortgage payment.
DSCR = Annual NOI ÷ Annual Mortgage Payment
A DSCR of 1.2 means the property generates $1.20 for every $1.00 owed in mortgage payments. It's the lender's safety cushion.
What's a Good DSCR?
Most lenders require a minimum DSCR of 1.2–1.25.
- Below 1.0: Property can't cover the mortgage. Most lenders won't touch this.
- 1.0–1.2: Barely covers debt. Almost no buffer for emergencies.
- 1.2–1.5: The sweet spot. Strong enough for conventional lending.
- 1.5+: Excellent. Lenders love this. Easy to refinance.
How to Calculate Your DSCR
Step 1: Calculate NOI (gross rent minus vacancy minus operating expenses).
Step 2: Calculate annual debt service from your loan terms.
Step 3: Divide NOI by annual debt service.
Example: $14,000 NOI ÷ $12,132 debt service = 1.15 DSCR (below the 1.2 minimum).
How to Improve Your DSCR
- Put more money down — reduces loan amount and debt service
- Negotiate lower purchase price — improves loan-to-value directly
- Raise rents to market rate — increases NOI
- Reduce operating expenses — self-manage to save 8–12% management fees
- Use a portfolio lender — may approve DSCR as low as 1.0–1.1
DSCR in Different Market Conditions
Stress-test your assumptions: if rents decline 5%, does DSCR stay above 1.2? A property with 1.5 DSCR can absorb it. A property at 1.1 can't.
Learn the full property analysis framework in our 5-step rental property guide.
Calculate your DSCR instantly. IntelSight handles all the math and shows DSCR alongside cap rate and cash-on-cash return.