DSCR Calculator
Calculate Debt Service Coverage Ratio for real estate investments and commercial loans. Determine if your property income covers debt payments.
Property & Loan Details
Annual rental income minus operating expenses
DSCR Results
DSCR Requirements by Loan Type
| Loan Type | Min DSCR | Preferred DSCR | Notes |
|---|---|---|---|
| Conventional | 1.20x | 1.25x+ | Standard commercial loans |
| SBA 504 | 1.15x | 1.25x+ | Owner-occupied properties |
| DSCR Loan (Investor) | 1.00x | 1.25x+ | No income verification |
| CMBS | 1.25x | 1.35x+ | Large commercial properties |
| Bridge Loan | 1.00x | 1.10x+ | Short-term financing |
About This Calculator
Calculate Debt Service Coverage Ratio for real estate investments and commercial loans. Determine if your property income covers debt payments.
Frequently Asked Questions
What is DSCR?
DSCR (Debt Service Coverage Ratio) measures a property's ability to cover its debt payments. It's calculated as Net Operating Income divided by Annual Debt Service.
What is a good DSCR?
Most lenders require a minimum DSCR of 1.20-1.25x. A DSCR of 1.25x means the property generates 25% more income than needed to cover debt payments.
How is DSCR used in lending?
Lenders use DSCR to assess loan risk. Higher DSCR indicates lower risk. DSCR loans for investors often require 1.0-1.25x minimum.
What is a good DSCR ratio for investment property loans in 2025?
Most lenders in 2025 require a minimum DSCR of 1.20 to 1.25 for investment property loans, meaning the property generates 20-25% more income than the debt obligations. A DSCR of 1.0 means the property barely breaks even. For example, if your annual net operating income (NOI) is $36,000 and your annual debt service is $28,000, your DSCR is 1.29, which typically qualifies for conventional DSCR loans. Premium rates are often reserved for ratios above 1.35. Properties with DSCR below 1.0 are considered cash-flow negative and are difficult to finance without a large down payment. Always calculate DSCR using verified rental income — many lenders use 75% of gross rent to account for vacancy and expenses.
How do you calculate DSCR and what expenses are included?
DSCR is calculated by dividing Net Operating Income (NOI) by Total Debt Service. NOI equals gross rental income minus operating expenses — which include property taxes, insurance, property management fees (typically 8-10% of rent), maintenance reserves, and HOA fees if applicable. Mortgage principal and interest are NOT included in expenses when calculating NOI; they form the denominator. Example: a duplex earning $4,200/month gross rent with $1,400/month in operating expenses has an NOI of $2,800/month ($33,600/year). If the annual mortgage payment is $27,000, the DSCR is 33,600 ÷ 27,000 = 1.24. Depreciation, capital expenditures, and income taxes are typically excluded. DSCR-specific loans use this ratio instead of personal income to qualify borrowers, making them popular with self-employed real estate investors.
Can I get a DSCR loan with a ratio below 1.0?
Some non-QM and portfolio lenders offer DSCR loans with ratios as low as 0.75, but expect significantly higher interest rates (2-4% above market), larger down payments (25-30%+), and higher fees. A DSCR below 1.0 means the property does not generate enough rental income to cover the mortgage — the investor must supplement payments from other income. Lenders accepting sub-1.0 DSCR typically require strong borrower financials, significant cash reserves (6-12 months), and properties in strong appreciation markets where value growth compensates for negative cash flow.