DSCR basics

What is DSCR in real estate?

DSCR stands for debt service coverage ratio. In rental property analysis, it compares the property's net operating income with the monthly debt payment.

DSCR formula

DSCR = Net Operating Income / Monthly Debt Payment

If a property has $2,500 of estimated monthly NOI and a $2,000 monthly debt payment, the DSCR is 1.25. That means the estimated property income covers 125% of the estimated debt payment before income taxes and lender-specific adjustments.

Why it matters

DSCR is useful because it shifts the first screen from the borrower's personal income to the rental property's income. Lenders still evaluate other factors, but DSCR helps investors quickly see whether rent appears strong enough to support the proposed loan.

Calculate a DSCR scenario