How the DSCR calculator works
DSCR — debt service coverage ratio — is the single most important number in a commercial or rental-property loan. It answers one question: does the property earn enough to cover its loan payment?
- Net operating income (NOI) = gross income − operating expenses (taxes, insurance, maintenance, management). It excludes the loan payment.
- Annual debt service = your monthly loan payment × 12.
- DSCR = NOI ÷ annual debt service. A DSCR of 1.25 means the property earns 25% more than the loan costs.
What DSCR do lenders require?
Most commercial real estate and DSCR lenders look for a minimum of 1.20 to 1.25. Above that, you have cushion and stronger terms. At 1.0 the property exactly breaks even on debt, which most lenders consider too risky without a larger down payment or a higher rate. Below 1.0 the income doesn't cover the payment.
How to raise a low DSCR
If your ratio is short of the minimum, you can raise income (higher rents, lower vacancy), cut operating expenses, borrow less (a bigger down payment), extend the amortization, or secure a lower rate. The calculator's "max loan at target DSCR" shows exactly how much you could borrow and still clear your lender's minimum.
This calculator provides estimates for educational purposes only and is not a loan offer or financial advice. Lender DSCR requirements, expense definitions, and underwriting vary. Confirm figures with your lender.