DSCR Calculator
The debt service coverage ratio of a rental property: how many times its net operating income covers the loan payments.
Result…
How it's calculated
DSCR = net operating income ÷ annual debt service NOI = (rent + other income) × 12 × (1 − vacancy) − operating expenses × 12 Debt service = monthly loan payment × 12
The debt service coverage ratio tells a lender whether a property earns enough to pay its loan. A DSCR of 1 means the net operating income exactly covers the payments; above 1 leaves a cushion; below 1 means the owner must top it up. Many lenders want somewhere above 1, but the minimum depends on the lender and the loan.
Your numbers, step by step
About the DSCR calculator
This DSCR calculator works out the debt service coverage ratio of a rental property: how many times its net operating income covers the loan payments. Lenders use the ratio to judge whether a property can carry its loan on its own income. Enter the rent, any other income, an allowance for vacancy and bad debt, and the operating expenses, then the loan details or the monthly payment. It shows the ratio, the yearly net operating income and debt service, the cash flow left after the loan, and the largest payment that would still meet the minimum you enter. Minimums differ by lender and loan, so you set your own. The working is shown with your numbers. To judge the return on the cash you put in, use the ROI calculator.
How to use it
- Enter the “Monthly rent” with every unit let, and any “Other monthly income”.
- Enter the “Vacancy and bad debt” allowance as a percentage.
- Enter the “Operating expenses” per month: tax, insurance, repairs and management, but not the loan.
- Under “Loan payment from”, give the “Loan details” or the “Monthly loan payment”.
- Enter the “Lender minimum DSCR” you are aiming for, then read the ratio.
Worked example
A property lets for 4,000 a month. Less 5% for vacancy and 1,000 a month of expenses, its net operating income is 33,600 a year. A loan payment of 1,800 a month is 21,600 a year, so the DSCR is 33,600 ÷ 21,600 = 1.56, leaving 12,000 a year after the loan. At a 1.25 minimum the payment could be up to 2,240 a month.
Updated
Questions people ask
How do I calculate DSCR?
Divide the net operating income for a year by the loan payments for the same year. Net operating income is the rent and other income, less vacancy, less operating expenses, before the loan.
What is a good DSCR?
Above 1 means the property's income covers its loan payments with something left; below 1 means you would have to top it up. Many lenders want a cushion above 1, but each sets its own minimum.
What does a DSCR of 1 mean?
The net operating income exactly equals the loan payments, leaving nothing for surprises such as a long vacancy or a big repair.
What mistake do people make when working out DSCR?
Leaving out vacancy and running costs, or counting the loan in the operating expenses. Both make the ratio look different from what a lender will see.
Will my lender get the same DSCR?
Possibly not. Lenders use their own rent estimates, vacancy rates and expense rules, and may count tax and insurance differently. Ask the lender how it works the ratio out, or speak to a mortgage broker or accountant.