Calculation guide
How to calculate DSCR for a rental property
Calculate DSCR by dividing the property's estimated net operating income by its monthly debt payment. The core formula is simple; the quality of the estimate depends on how carefully you model rent, vacancy, and operating expenses.
DSCR = Net Operating Income / Monthly Debt Payment
Step 1: estimate effective rent
Start with monthly rent, then subtract a vacancy allowance. If rent is $3,000 and vacancy is 5%, effective rent is $2,850.
Step 2: subtract operating expenses
Common operating expenses include property tax, insurance, HOA, repairs, maintenance reserve, management fee, utilities paid by owner, and other recurring property costs.
Step 3: divide by monthly debt service
If NOI is $2,250 and the monthly debt payment is $1,800, DSCR is 1.25. That means estimated NOI is 125% of estimated debt service.
| Input | Example |
|---|---|
| Monthly rent after vacancy | $2,850 |
| Operating expenses | $600 |
| NOI | $2,250 |
| Debt payment | $1,800 |
| DSCR | 1.25 |
Want to avoid spreadsheet errors?
Use the DSCR calculatorThis page is for educational use and does not provide underwriting or mortgage advice.