What DSCR do lenders typically want?

Most commercial and DSCR-loan lenders want a ratio of at least 1.20-1.25, meaning income exceeds debt payments by 20-25%. A DSCR below 1.0 means the property doesn't cover its own debt.

How is DSCR different from cap rate?

Cap rate measures return relative to property value with no financing involved; DSCR measures whether income covers the actual debt payments on a specific loan.

DSCR Calculator (Debt Service Coverage Ratio)

The Debt Service Coverage Ratio (DSCR) measures whether a property or business generates enough income to cover its debt payments. Lenders use DSCR to evaluate loan risk — a ratio above 1.0 means income exceeds debt obligations.

Inputs

Results

DSCR: 1.25

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Formula

DSCR = Net Operating Income / Annual Debt Service

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Real Estate Investment Metrics: Cap Rate, NOI, DSCR, and Commissions

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