DSCR Calculator

How DSCR is calculated

For a DSCR loan on a rental, most lenders divide the property's monthly rent by its full monthly payment: principal, interest, taxes, insurance and any HOA dues, often shortened to PITIA. A DSCR of 1.0 means the rent exactly covers that payment. A DSCR of 1.25 means rent is 25% higher than the payment.

Some lenders, and most commercial underwriting, use net operating income in place of gross rent, which produces a lower number. The rental property calculator shows that NOI-based DSCR alongside cash flow.

Example: a $200,000 rental bought with 25% down borrows $150,000 at 7.5% over 30 years. Principal and interest come to about $1,049 a month. Add $200 of property taxes and $100 of insurance for a full payment of about $1,349. At $2,000 rent, DSCR is $2,000 ÷ $1,349 = 1.48.

What DSCR do lenders require?

Many DSCR lenders look for at least 1.0 to 1.25, and some will lend below 1.0 with a larger down payment or a higher rate. A higher ratio usually earns better terms. The calculator shows the rent needed to reach your target and the largest loan that rent supports.

Which rent the lender uses

Lenders typically use the lower of the current lease and an appraiser's market rent estimate, and a vacant property is usually underwritten on the appraiser's estimate. Check your rent assumption against comparable rentals first. How to estimate rent walks through it.

DSCR FAQ

What is a DSCR loan?

A DSCR loan is an investment property mortgage that qualifies mainly on the property's rent compared with its payment, instead of on your personal income.

Is a DSCR of 1.25 good?

For most DSCR lenders, yes. Rent exceeds the full payment by 25%, which leaves some room for vacancy and repairs. Whether the deal works for you still depends on cash flow after every expense.

Can DSCR be below 1?

Yes. Below 1.0 the rent does not cover the payment. Some lenders still lend at that level with more cash down or a higher rate, but the property would need money from you each month.

Does a good DSCR mean the rental cash-flows?

Not necessarily. Lender DSCR leaves out vacancy, repairs, capital reserves and management. Run the full numbers in the rental property calculator.

Related

• Rental property calculator: cash flow, cap rate, cash-on-cash and NOI-based DSCR
• BRRRR calculator for a refinance after rehab
• Cash-on-cash return calculator
• Cap rate calculator
• ZIP data to check rents near the property
• All rental property calculators