Include taxes, insurance, maintenance, HOA (exclude mortgage).
Total principal and interest payments per year.
Net Operating Income (NOI):–
Total Debt Service:–
DSCR Ratio:–
function calculateDSCR() {
// Get Input Values
var incomeInput = document.getElementById("grossAnnualIncome").value;
var expensesInput = document.getElementById("annualExpenses").value;
var debtInput = document.getElementById("annualDebtService").value;
// Validation
if (incomeInput === "" || expensesInput === "" || debtInput === "") {
alert("Please fill in all fields to calculate the DSCR.");
return;
}
var income = parseFloat(incomeInput);
var expenses = parseFloat(expensesInput);
var debt = parseFloat(debtInput);
if (isNaN(income) || isNaN(expenses) || isNaN(debt)) {
alert("Please enter valid numeric values.");
return;
}
if (debt === 0) {
alert("Annual Debt Service cannot be zero (division by zero).");
return;
}
// Logic
var noi = income – expenses;
var dscr = noi / debt;
// Formatting Results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById("resultNOI").innerHTML = formatter.format(noi);
document.getElementById("resultDebt").innerHTML = formatter.format(debt);
document.getElementById("resultRatio").innerHTML = dscr.toFixed(2) + "x";
// Interpretation Logic
var interpretationBox = document.getElementById("resultInterpretation");
interpretationBox.className = "dscr-final-score"; // Reset classes
if (dscr >= 1.25) {
interpretationBox.innerHTML = "Positive Cash Flow (Lender Safe)";
interpretationBox.classList.add("score-good");
} else if (dscr >= 1.0) {
interpretationBox.innerHTML = "Break-Even / High Risk";
interpretationBox.classList.add("score-warn");
} else {
interpretationBox.innerHTML = "Negative Cash Flow";
interpretationBox.classList.add("score-bad");
}
// Show Results
document.getElementById("dscr-results").style.display = "block";
}
What is the Debt Service Coverage Ratio (DSCR)?
The Debt Service Coverage Ratio (DSCR) is a critical financial metric used by real estate investors and lenders to analyze the profitability of an income-producing property. Specifically, it measures a property's available cash flow to pay its current debt obligations.
Unlike residential mortgages that focus on the borrower's personal income, DSCR loans focus primarily on the cash flow generated by the property itself. A DSCR of 1.0 means the property generates just enough income to cover its debt, while a ratio greater than 1.0 indicates positive cash flow.
How the DSCR Formula Works
To calculate the DSCR, you first need to determine the property's Net Operating Income (NOI) and the total Annual Debt Service. The formula is:
DSCR = Net Operating Income (NOI) / Total Debt Service
Net Operating Income (NOI): This is your Gross Annual Rental Income minus Annual Operating Expenses (taxes, insurance, management fees, repairs). Note: NOI does not include mortgage payments.
Total Debt Service: This refers to the total amount of principal and interest payments required for the loan over the course of a year.
Interpreting Your DSCR Results
Understanding your score is vital for securing financing and ensuring the health of your investment portfolio:
DSCR > 1.25: This is the "Gold Standard" for most lenders. It indicates that the property generates 25% more income than is necessary to pay the debt, providing a safety buffer for vacancies or unexpected repairs.
DSCR = 1.00: The Break-Even point. The property makes exactly enough money to pay the mortgage. Lenders view this as risky because any increase in expenses will result in a loss.
DSCR < 1.00: Negative Cash Flow. The property is losing money every month, and the borrower must pay out of pocket to cover the debt service. Most lenders will reject loans with a DSCR under 1.0 unless there is a significant down payment or strong borrower financials.
Example Calculation
Imagine you are purchasing a commercial property or a rental home:
Gross Income: $120,000 per year
Operating Expenses: $40,000 per year
NOI: $80,000 ($120,000 – $40,000)
Annual Debt Service: $50,000
Using our DSCR Calculator, the math would be: $80,000 / $50,000 = 1.60. This indicates a very healthy investment that would likely be approved for financing.