For real estate investors, the Debt Service Coverage Ratio (DSCR) is one of the most critical metrics used by lenders to evaluate the risk of a rental property loan. Unlike traditional mortgages that rely on your personal income (DTI), DSCR loans focus entirely on the cash flow generated by the property itself.
Use our free calculator below to determine if your investment property generates enough income to cover its debt obligations and qualify for financing.
Calculate Your Property's DSCR
Do not include mortgage payment here.
Principal, Interest, and any other debt costs.
DSCR Ratio
0.00
Net Operating Income (NOI)
$0.00
/ Month
What is the DSCR Formula?
The Debt Service Coverage Ratio formula is relatively simple but powerful. It compares a property's annual (or monthly) Net Operating Income (NOI) to its debt obligations.
DSCR = Net Operating Income / Total Debt Service
Key Definitions:
Net Operating Income (NOI): The total revenue from the property minus all necessary operating expenses. Operating expenses include property taxes, insurance, management fees, HOA dues, and repairs, but exclude the mortgage payment itself.
Total Debt Service: The current debt obligations on the property, typically the principal and interest payments on the loan.
Interpreting Your DSCR Score
Lenders use the DSCR to determine if a property is "self-sustaining." Here is how to interpret the results from the calculator above:
DSCR < 1.00:Negative Cash Flow. The property is losing money. The income generated is insufficient to cover the mortgage and expenses. Lenders will typically reject this unless you have significant cash reserves.
DSCR = 1.00:Break-Even. The property generates exactly enough income to pay its bills and debt. There is no profit margin for vacancies or repairs.
DSCR > 1.25:Positive Cash Flow. This is the gold standard for most lenders. It indicates the property generates 25% more income than required to service the debt, providing a safety cushion.
Why Real Estate Investors Prefer DSCR Loans
For investors with multiple properties, standard loans become difficult to obtain because of high Debt-to-Income (DTI) ratios. DSCR loans bypass personal income verification. As long as the property's DSCR is strong (usually 1.20 or higher), the loan can be approved regardless of the investor's personal employment status. This makes it an essential tool for scaling a real estate portfolio.
function calculateDSCR() {
// 1. Get input values
var incomeInput = document.getElementById('dscrRentalIncome');
var expensesInput = document.getElementById('dscrExpenses');
var debtInput = document.getElementById('dscrDebt');
// Parse values
var income = parseFloat(incomeInput.value);
var expenses = parseFloat(expensesInput.value);
var debt = parseFloat(debtInput.value);
// 2. Validate inputs
if (isNaN(income) || isNaN(expenses) || isNaN(debt)) {
alert("Please enter valid numbers for Income, Expenses, and Debt Service.");
return;
}
if (debt === 0) {
alert("Debt Service cannot be zero.");
return;
}
// 3. Perform Calculations
var noi = income – expenses;
var dscr = noi / debt;
// 4. Update UI Results
var resultContainer = document.getElementById('dscr-results');
var dscrDisplay = document.getElementById('dscrValueDisplay');
var noiDisplay = document.getElementById('noiDisplay');
var statusDisplay = document.getElementById('dscrStatus');
var explanation = document.getElementById('dscrExplanation');
// Show container
resultContainer.style.display = 'block';
// Set Values
dscrDisplay.innerText = dscr.toFixed(2);
noiDisplay.innerText = "$" + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// 5. Determine Status and Color
statusDisplay.className = 'status-badge'; // reset class
if (dscr >= 1.25) {
statusDisplay.innerText = "LENDER PREFERRED";
statusDisplay.classList.add('status-good');
dscrDisplay.style.color = "#27ae60";
explanation.innerHTML = "Great! This property generates significantly more income than the debt costs. Most DSCR lenders will view this as a low-risk investment.";
} else if (dscr >= 1.00) {
statusDisplay.innerText = "AT RISK / BREAK EVEN";
statusDisplay.classList.add('status-risk');
dscrDisplay.style.color = "#d35400";
explanation.innerHTML = "Caution: The property is barely covering its debt. Some lenders may require a higher down payment or higher interest rate to approve this loan.";
} else {
statusDisplay.innerText = "NEGATIVE CASH FLOW";
statusDisplay.classList.add('status-bad');
dscrDisplay.style.color = "#c0392b";
explanation.innerHTML = "Warning: The operating income is insufficient to cover the debt. You would need to subsidize this property from personal funds every month.";
}
}