DSCR Calculator: How to Calculate Debt Service Coverage Ratio
Learn how to calculate DSCR with a DSCR calculator, the debt service coverage ratio formula, worked examples, and what a good DSCR looks like.
By Michael Torres, Real Estate Investment Analyst · Last reviewed: 2026 · 8 min read
Run the numbers while you read
Open the matching calculator and test each assumption against your own deal.
What DSCR Measures
The debt service coverage ratio compares the income a property produces to the debt it has to pay. A DSCR calculator returns a single number that tells you how many times the property income covers its annual loan payments.
Lenders use DSCR to gauge risk, and investors use it to see whether a property has a cash cushion or is running close to the edge. A ratio of 1.0 is the break-even line between covering the debt and falling short.
The DSCR Formula
DSCR = Net Operating Income / Annual Debt Service
To calculate DSCR, start with net operating income, which is effective gross rent minus operating expenses such as taxes, insurance, management, maintenance, repairs, and vacancy. Do not subtract the mortgage; NOI is measured before debt.
Divide NOI by annual debt service, the sum of the year’s loan payments. The result is the DSCR. A DSCR calculator automates this so you can test different rents, expenses, and loan terms quickly.
Step-by-Step Calculation
- Add up annual gross rent and any other property income.
- Subtract a vacancy allowance to get effective gross income.
- Subtract operating expenses to get net operating income.
- Add up twelve months of loan payments to get annual debt service.
- Divide NOI by annual debt service to get DSCR.
Worked Example
A property collects $36,000 in annual rent. After a 5% vacancy allowance and $9,000 of operating expenses, NOI is about $25,200. The loan payment is $1,700 per month, or $20,400 per year.
DSCR equals 25,200 divided by 20,400, which is about 1.24. The property earns roughly 24% more than it needs to cover the loan, which most lenders would view as a comfortable cushion.
What Counts as a Good DSCR
There is no universal threshold, but many lenders prefer 1.20 to 1.25 or higher for rental loans. A DSCR near 1.0 leaves little room for vacancy or repairs, and a DSCR below 1.0 means the property does not cover its own debt from operations.
Use DSCR alongside cash flow, cap rate, and cash-on-cash return. DSCR tells you about debt safety, but it does not tell you the whole return picture.
Frequently Asked Questions
How do you calculate DSCR?
Divide net operating income by annual debt service. NOI is gross income minus operating expenses before the mortgage, and annual debt service is the total of the year’s loan payments. A DSCR of 1.25 means income is 25% higher than the debt payment.
What is a good DSCR ratio?
Many lenders look for 1.20 to 1.25 or higher, though requirements vary by lender, property type, and market. A higher ratio means a larger cushion between income and debt. This is educational information, not a lender requirement.
Does DSCR include the mortgage in NOI?
No. Net operating income is calculated before the mortgage. The mortgage payment appears only in the denominator as annual debt service. Subtracting it twice would understate DSCR.
What does a DSCR of 1.0 mean?
A DSCR of 1.0 means net operating income exactly equals annual debt service, so the property breaks even on its loan with no margin for vacancy, repairs, or rate changes.
Michael Torres · Real Estate Investment Analyst, Austin, TX
Michael has spent more than a decade underwriting single-family and small multifamily rentals. He writes about cash flow analysis, cap rate, and how investors should stress test a deal before making an offer.
Educational Disclaimer
All calculations are estimates for educational and planning purposes only. PropertyFlowTools.com does not provide financial, tax, legal, lending, or investment advice. Verify calculations and consult qualified professionals before making property or financing decisions.