Calculator · Buy and hold

DSCR calculator

Debt service coverage ratio: does the property's income cover the loan? See DSCR two common ways and the largest loan that still meets your lender's target.

Results

Updates as you type. The formulas are under "How this is calculated" below.

DSCR (NOI / debt service)
Meets lender minimum?
Rent / PITIA
Max loan at lender minimum

Details

Effective gross income
NOI
Monthly P&I
Annual debt service
Monthly PITIA
Max P&I at lender minimum

How to use this calculator

Enter the total monthly rent and a vacancy allowance.
Enter property tax, insurance, HOA and other operating costs.
Enter the loan amount, interest rate and term.
Enter the minimum DSCR your lender asks for.
Compare the two ratios and read the maximum loan at that minimum.

Worked example

Say a rental brings in $2,800 a month and you want a $280,000 loan at 7.25% over 30 years (the values loaded above).

Effective gross income after 5% vacancy is $31,920. After costs, NOI is $22,920.

Monthly principal and interest is $1,910.09, or $22,921 a year, so DSCR is 1.00x. With a lender minimum of 1.20 that does not meet the target.

Using the simpler rent / PITIA method, monthly PITIA is $2,410.09 and the ratio is 1.16x.

At a 1.20 minimum, the most payment NOI can carry is $1,591.67 a month, which supports a loan of about $233,322.

How this is calculated

NOI = monthly rent x 12 x (1 - vacancy %) - property tax - insurance - HOA x 12 - other operating costs.
Monthly P&I = P x r / (1 - (1 + r)^-n), with r = rate / 12 and n = years x 12.
DSCR = NOI / (P&I x 12) This is how the Cap Rate Studio spreadsheets and most commercial lenders measure it.
Rent / PITIA = monthly rent / (P&I + tax / 12 + insurance / 12 + HOA) Many residential "DSCR loan" lenders use this simpler ratio instead. It ignores vacancy and other costs, so it reads higher.
Max loan: the payment NOI can carry at your target is NOI / target / 12. The loan that payment supports is payment x (1 - (1 + r)^-n) / r

Frequently asked questions

What is DSCR?

Debt service coverage ratio compares a property income to its loan payments. A DSCR of 1.0 means income just covers the debt payments. Above 1.0 means there is a cushion.

What DSCR do lenders want?

It varies by lender and loan. Many ask for somewhere around 1.0 to 1.25 or more. Ask your lender which method and minimum they use.

Why are there two DSCR numbers?

Commercial lenders usually divide NOI by debt service. Many residential DSCR loan lenders divide rent by the full monthly payment including taxes and insurance (PITIA). The two methods can give different answers for the same property.

How can I improve my DSCR?

You can raise income, cut costs, put more money down for a smaller loan, or look for a lower rate. Which options work depends on the deal and the lender.