DSCR Calculator
DSCR = net operating income ÷ annual debt service, though many residential DSCR loan programs instead divide gross monthly rent by the monthly payment including taxes, insurance and HOA dues (PITIA), so this calculator shows both.
Last updated: · by MakeLease Editorial Team
| Gross annual income | $28,800 |
| Less vacancy | −$1,440 |
| Less operating expenses | −$8,700 |
| Net operating income | $18,660 |
| Annual principal and interest | $21,815 |
| DSCR | 0.86x |
| Principal and interest | $1,817.96 |
| Taxes, insurance and HOA per month | $425.00 |
| PITIA | $2,242.96 |
| Gross monthly rent | $2,400 |
| DSCR | 1.07x |
The calculator is free to use without an account. Saving and comparing deals needs a free account.
How it's calculated
NOI method: DSCR = NOI ÷ annual principal and interest
NOI = (rent + other income) × 12 × (1 − vacancy) − taxes − insurance − HOA − other operating expenses
Rent ÷ PITIA method: DSCR = gross monthly rent ÷ (monthly P&I + taxes ÷ 12 + insurance ÷ 12 + HOA ÷ 12)
Max loan = the principal whose payment equals NOI ÷ target DSCR ÷ 12, at the same rate and term
Both methods ask the same question, whether the property's income covers its loan, but they draw the line in different places.
- NOI (net operating income) is a year of rent and other income, less vacancy and every cost of running the property: taxes, insurance, HOA dues, repairs, management, utilities you pay and reserves. Loan payments, depreciation and income taxes stay out.
- Debt service is twelve months of principal and interest on the loan. On an interest-only loan it is interest alone. Taxes and insurance are not debt service in the NOI method; they are already subtracted inside NOI.
- PITIA is principal, interest, taxes, insurance and association dues: the full monthly housing payment. The rent ÷ PITIA method compares it to gross rent, with no vacancy and no repair or management costs taken out.
- Target DSCR is the minimum coverage you or a lender want. The calculator uses it with the NOI method to work backward to the largest loan your income supports.
As a rule, residential "DSCR loans" from non-QM lenders commonly use gross rent ÷ PITIA. Commercial and agency multifamily lenders use NOI ÷ debt service, with their own underwritten rent and expenses.
Worked example
A single-family rental leases for $2,400 a month. Taxes are $3,600 a year, insurance $1,500, and you budget $3,600 a year for repairs, management and reserves. You want a $260,000 loan at 7.5% over 30 years.
- Gross income: $2,400 × 12 = $28,800. Less 5% vacancy = $27,360.
- NOI: $27,360 − $8,700 in operating expenses = $18,660.
- Principal and interest: $1,817.96 a month, or $21,815 a year.
- NOI method: $18,660 ÷ $21,815 = 0.86x.
- PITIA: $1,817.96 + $425.00 for taxes, insurance and HOA = $2,242.96. Rent ÷ PITIA: $2,400 ÷ $2,242.96 = 1.07x.
- To reach 1.25x on the NOI method, annual debt service can be at most $18,660 ÷ 1.25x = $14,928, which supports a loan of about $177,914.
The same property passes one test and fails the other. On rent ÷ PITIA it covers the payment with a small cushion. Once vacancy, repairs and management come out, NOI no longer covers principal and interest, and you would be adding money every month. A residential DSCR lender might approve this loan; your own budget should take the NOI number seriously.
What's a good DSCR?
A DSCR of 1.00x is break-even: income exactly covers the loan. Anything below it means the property needs money from you each month. Lenders and investors want a cushion above 1.00x so a vacancy or repair does not put the loan at risk.
For multifamily loans, Freddie Mac's Conventional Small FAQs state that "the Conventional baseline is 80% / 1.25x", meaning 80% loan-to-value and 1.25x DSCR, and that each deal is individually quoted, with any adjustments made at the time of quote. That is a multifamily lending program, not a rule for one-to-four-unit rentals.
Residential DSCR loan programs for single-family and small rentals typically look for something in the 1.0x to 1.25x range on the rent ÷ PITIA method. Requirements vary by lender and program, so treat any number you hear as a starting point and get the lender's own guidelines.
For your own analysis, the NOI method is the stricter and more honest test, because it counts the costs that actually come out of the rent. What moves it: the rent, your expense estimates, the interest rate, the amortization term and the loan size.
Common mistakes
- Mixing the two methods. Quoting a rent ÷ PITIA ratio against an NOI-based minimum, or the other way round, makes a deal look better or worse than it is.
- Putting taxes and insurance in both places. In the NOI method they are operating expenses inside NOI. Don't add them to debt service as well.
- Using an interest-only payment without a plan for amortization. Coverage that only works on interest-only payments can fail when principal payments start.
- Assuming the lender will use your rent number. A lender may base rent on an appraiser's market-rent estimate rather than your lease. Ask which figure it uses.
- Skipping vacancy and repairs because the lender does. A loan you qualify for on gross rent can still lose money once real operating costs arrive.
Frequently asked questions
- Why are my two DSCR numbers different?
- The NOI method subtracts vacancy and every operating expense, including repairs, management and reserves, before dividing by principal and interest. The rent ÷ PITIA method starts from gross rent with nothing taken out, and puts only taxes, insurance and HOA dues in the denominator. Because it ignores vacancy, repairs and management, it usually comes out higher for the same property.
- Which DSCR does my lender use?
- Ask. Many residential DSCR loans from non-QM lenders use gross rent ÷ PITIA, and the rent figure may come from your lease or from an appraiser's market-rent estimate. Commercial and agency multifamily lenders usually use NOI ÷ debt service with their own underwritten income and expenses. The definition, the minimum and the rent source all vary by lender and program.
- What does a DSCR of 1.0 mean?
- A DSCR of 1.0x means income exactly covers the debt payments, with nothing left over. Below 1.0x the property does not cover its own loan and you make up the difference. Above 1.0x there is a cushion.
- How do I raise my DSCR?
- Borrow less, get a lower rate or a longer amortization, raise rent to market, or cut operating expenses. The max loan line shows how far the loan would have to shrink to reach your target with the current rent and expenses. An interest-only payment also raises DSCR in the short run, but the payment jumps when amortization starts.
Further reading
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