DSCR Calculator
Calculate your Debt Service Coverage Ratio instantly. See whether your rental property meets lender requirements — and how much cushion you have.
What is DSCR?
DSCR — Debt Service Coverage Ratio — tells you whether a rental property generates enough income to cover its debt payments. It's the single number lenders look at to decide whether a property qualifies for financing, and one of the most important metrics for any leveraged real estate investor.
A DSCR of 1.0 means the property exactly breaks even on debt. Above 1.0, you have surplus income. Below 1.0, the property costs you money every month.
Formula
DSCR = Annual NOI ÷ Annual Debt Service
Annual NOI = (Effective Monthly Rent − Operating Expenses) × 12
Annual Debt Service = Monthly Mortgage Payment × 12
The key distinction: operating expenses do not include the mortgage. That's already in the denominator. Operating expenses are things like property management, maintenance, insurance, taxes, and a vacancy allowance.
DSCR Benchmarks Explained
Most conventional and DSCR loan programs require a minimum of 1.25x. Here's what each range means.
Negative cash flow
Income does not cover debt payments. Property loses money every month.
Marginal — below lender minimum
Most lenders require 1.25x minimum. A vacancy spike could create shortfalls.
Healthy — meets lender standard
Comfortable cushion above debt payments. Qualifies for most conventional loans.
Strong — significant buffer
Well above requirements. Resilient to vacancies, expense spikes, or rate changes.
Frequently Asked Questions
What is DSCR in real estate?+
DSCR (Debt Service Coverage Ratio) measures whether a rental property generates enough income to cover its mortgage payments. A DSCR of 1.25x means the property produces 25% more income than needed to pay the loan — a comfortable cushion. Below 1.0 means the property runs at a loss.
Why do lenders require a minimum DSCR of 1.25?+
Lenders use DSCR to assess loan risk. A 1.25x minimum means the property could handle a ~20% drop in income (from vacancy, rent cuts, or expense increases) before debt service becomes uncovered. It's a safety buffer — both for the lender and for you.
What's the DSCR formula?+
DSCR = Annual NOI ÷ Annual Debt Service. NOI is your effective gross rent (after vacancy) minus operating expenses. Annual debt service is your total mortgage payments for the year. Operating expenses do not include the mortgage — that's already in the denominator.
How can I improve my DSCR?+
Four levers: (1) Increase rent — even a small bump moves DSCR significantly. (2) Reduce operating expenses — tighter management, better insurance rates, DIY maintenance. (3) Larger down payment — reduces loan amount and monthly payment. (4) Longer loan term — lowers monthly payment, though you pay more interest over time.
Is DSCR the same as cash-on-cash return?+
No — they measure different things. DSCR tells you whether the property pays for itself (income vs. debt). Cash-on-cash return tells you the return on your equity investment (annual cash flow ÷ cash invested). A deal can have a DSCR above 1.25 but still have a low cash-on-cash return if you put a large down payment in.