DSCR Calculator
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DSCR = net operating income ÷ yearly debt payments. A property with $36,000 of NOI and $28,800 of yearly mortgage payments has a DSCR of 1.25: it earns $1.25 for every $1 of debt payments. Many lenders look for 1.20 to 1.25 or higher.
Rent after vacancy minus operating expenses, before loan payments.
| Coverage | |
| Net operating income | $36,000 |
| Yearly debt service | $28,800 ($2,400 a month) |
| DSCR | 1.25 |
| Cash left after debt | $7,200 a year |
| At a 1.25 minimum DSCR | |
| Largest monthly payment | $2,400 |
| Largest loan (7%, 30 yr) | $360,738 |
| NOI needed for this debt | $36,000 |
Show steps
- Yearly debt service = $2,400.00 × 12 = $28,800.
- DSCR = $36,000 ÷ $28,800 = 1.25.
- Largest payment at 1.25 = $36,000 ÷ 1.25 ÷ 12 = $2,400; the loan that payment supports is $360,738.
How to use the DSCR calculator
- Enter the property’s yearly net operating income (NOI).
- Enter the monthly loan payment, or the loan amount, rate and amortization so the payment is worked out.
- Enter the lender’s minimum DSCR to see the largest loan that would qualify.
Reading the ratio
| DSCR | Meaning |
|---|---|
| Below 1.00 | Income does not cover the loan payments |
| 1.00 | Income exactly covers the payments, with nothing to spare |
| 1.20 to 1.25 | A common minimum for many commercial and investor loans |
| 1.50 or more | A strong cushion against vacancies and repairs |
Finding the maximum loan
Turn the formula around: largest yearly debt service = NOI ÷ required DSCR. With $36,000 of NOI and a 1.25 minimum, the yearly payments can be at most $28,800 ($2,400 a month). At 7% over 30 years, a $2,400 payment supports a loan of about $360,700.
DSCR practice questions
Test yourself with 6 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.
NOI is before debt service; DSCR then compares it with the loan payments.
Quiz complete
Frequently asked questions
How do you calculate DSCR?
Divide the yearly net operating income by the yearly loan payments (principal and interest). $36,000 ÷ $28,800 = 1.25.
What is a good DSCR?
Many lenders want at least 1.20 to 1.25 for income property. Higher is safer, since it leaves room for vacancies and repairs.
What is a DSCR loan?
A type of investor mortgage that qualifies you mainly on the property's rental income compared with its payments, instead of your personal income.
How can I raise my DSCR?
Increase income (higher rent, fewer vacancies), cut operating costs, make a larger down payment, or choose a longer amortization or lower rate to shrink the payments.
Sources
- Federal Reserve: Commercial real estate lending (Commercial Bank Examination Manual)
- U.S. Small Business Administration: Lender guidance (SOP 50 10)
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