Real estate & rental
Real Estate DSCR Calculator
Works debt service coverage ratio, which is how a lender decides whether the income supports the loan.
Result
An arithmetic tool, not investment advice. Property returns depend on the local market, the condition of the building, financing terms and tax position, none of which a calculator can see. Verify the income and expense figures against actual statements rather than a seller's projection. Lenders calculate NOI to their own standards, which are usually stricter than an owner's: they often impose a minimum vacancy factor, a management fee even for self-managed property, and a replacement reserve. Expect the lender's NOI to be lower than yours.
Get a Free Business AuditHow the calculation works
Net operating income divided by annual debt service, meaning principal and interest. A ratio of one means the income exactly covers the payments with nothing to spare, and lenders generally require a cushion above that, with the required level varying by lender and property type. The calculation turns on how the lender defines net operating income, which may not match the owner's figure.
What moves the number
- Net operating income as the lender calculates it.
- Annual debt service at the proposed rate and term.
- Vacancy and management allowances the lender imposes.
- Interest rate, which moves the denominator directly.
Where this one goes wrong
Lenders usually apply their own vacancy and management assumptions regardless of actual performance, so a property that comfortably covers its payments in practice can fail the lender's test on paper. Ask what assumptions the lender uses before building a projection around your own. Rate movements also change the ratio without anything about the property changing, which is why a deal that worked at one rate can fail at another and why a ratio calculated at a rate you have not locked is provisional.
Before you quote
- Ask the lender which vacancy and expense assumptions they apply.
- Recalculate at the rate you can actually lock.
- Check whether the lender includes taxes and insurance in debt service.
Questions
About this calculator
Why does the lender's DSCR differ from mine?
Because lenders apply their own vacancy and management assumptions regardless of actual performance, and some include taxes and insurance in the debt service figure. Asking which assumptions they use before building a projection avoids an unpleasant surprise at underwriting.
What ratio do lenders require?
A cushion above one, with the level varying by lender, loan programme and property type rather than following a single standard. The requirement is worth asking about early, since it determines how much can be borrowed against a given income.
Does the interest rate change the ratio?
Directly, since it moves the debt service. A deal that works at one rate can fail at another with nothing about the property changing, which is why a ratio calculated at an unlocked rate is provisional rather than settled.
The formula
DSCR = net operating income / annual debt service
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How to use this calculator
- Net operating income per year ($). Enter your own figure; the page starts at $28,400.
- Loan amount ($). Enter your own figure; the page starts at $288,750.
- Interest rate (%). Enter your own figure; the page starts at 7.2%.
- Amortisation period (years). Enter your own figure; the page starts at 30.
- Lender's minimum DSCR. Enter your own figure; the page starts at 1.25.
The result updates as you type, so you can try a figure, see what it does to dscr, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Net operating income per year | $28,400 |
| Loan amount | $288,750 |
| Interest rate | 7.2% |
| Amortisation period (years) | 30 |
| Lender's minimum DSCR | 1.25 |
What comes out
| Result | Value |
|---|---|
| DSCR main result | 1.2 |
| Annual debt service | $23,520 |
| Monthly payment | $1,960.00 |
| Largest loan at the minimum DSCR | $278,928 |
| NOI above what the minimum requires | $5,680 |
DSCR is 1.2, below the 1.25 the lender wants. At this income the largest loan that qualifies is about $278,928.
How sensitive the answer is
Holding everything else steady and changing only net operating income per year, this is what happens to dscr. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Net operating income per year ($) | DSCR |
|---|---|
| $14,200 | 0.6 |
| $21,300 | 0.9 |
| $28,400 example above | 1.2 |
| $42,600 | 1.8 |
| $56,800 | 2.4 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Net operating income per year ($)
- A money amount, starting at $28,400.
- Loan amount ($)
- A money amount, starting at $288,750.
- Interest rate (%)
- A percentage, between 0 and 20, starting at 7.2%.
- Amortisation period (years)
- A number, between 0 and 50, starting at 30.
- Lender's minimum DSCR
- A number, between 0.5 and 3, starting at 1.25.
What the results tell you
| Result | What it is |
|---|---|
| DSCR | The headline result. A decimal figure. |
| Annual debt service | A money figure. |
| Monthly payment | A money figure. |
| Largest loan at the minimum DSCR | A money figure. |
| NOI above what the minimum requires | A money figure. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
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