What This Calculator Does

This tool calculates a debt-service coverage ratio from the numbers you enter: the property's effective gross income, operating expenses, net operating income, and the debt service on the loan you model. It shows whether the income covers the debt, and by how much.

Who It's For

It is for investors evaluating DSCR loans, and for agents and lenders who want to see how a property's cash flow maps to a coverage ratio. It is an educational estimate, not a lender's underwriting.

What Each Input Means

  • Gross monthly rent: the scheduled rent before vacancy.
  • Vacancy %: the income you expect to lose to vacancies and turnover.
  • Operating expenses: taxes, insurance, HOA, management, maintenance, CapEx, and other recurring costs.
  • Loan amount, rate, term: the debt service you want to test.

How the Calculation Works

  • Effective gross income = gross rent times (1 minus vacancy), annualized.
  • NOI = effective gross income minus operating expenses.
  • Annual debt service = the monthly payment on the modeled loan times 12.
  • DSCR = NOI divided by annual debt service.

What the Output Means

A DSCR of 1.0 means the modeled income exactly covers the modeled debt service. Above 1.0 means cushion; below 1.0 means the property does not cover the debt from income alone. Lenders set their own minimums and use their own income and expense assumptions, so your number here is a starting point, not a lender's number.

Common Questions

  • How do lenders calculate DSCR differently? Lenders use different rent estimates, expense ratios, vacancy assumptions, and debt-service definitions. Two lenders can produce different ratios on the same property.
  • What if my DSCR is below 1.0? The property does not cover the debt from modeled income. You might adjust the loan size, find better terms, or reconsider the deal.
  • Does this include a personal income check? DSCR loans are typically underwritten on the property's cash flow rather than the borrower's income, but requirements vary by lender and loan program.

Limitations

The ratio uses only the numbers you enter and a standard amortizing payment. Lenders may use interest-only payments, different expense ratios, or different rent estimates, and their underwriting standards vary. This tool is not an approval and does not model taxes, insurance changes, or lender fees.

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