Calculate Debt Service Coverage Ratio (DSCR) to determine if your rental property qualifies for investment property loans.
Income
Monthly Expenses
Weak (0.85–1.0)
| Effective Gross Income | $27,600 |
| Operating Expenses | $8,808 |
| Net Operating Income (NOI) | $18,792 |
| Annual Debt Service | $21,600 |
| DSCR | 0.87 |
| Annual Cash Flow | $-2,808 |
| Min. Rent for 1.25 DSCR | $3,243/mo |
DSCR Benchmarks
≥ 1.25: Excellent — most lenders approve
1.0–1.25: Acceptable — some lenders approve
0.85–1.0: Weak — few lenders, higher rates
< 0.85: Below threshold — very hard to finance
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DSCR = Net Operating Income (NOI) / Annual Debt Service
NOI = Effective Gross Income − Operating Expenses
Most lenders require DSCR ≥ 1.25
Most lenders require DSCR ≥ 1.25 for investment properties. 1.0 means income exactly covers debt service. Higher is better — 1.5+ gives lenders comfort. Some DSCR loan programs accept 1.0.
DSCR loans qualify borrowers based on the property's rental income vs. mortgage payment — not the borrower's personal income. Popular for real estate investors who can't show W-2 income.
DSCR = Net Operating Income (NOI) / Annual Debt Service. If NOI is $24,000 and annual mortgage is $20,000, DSCR = 1.20 — meaning the property generates 20% more income than needed to cover debt.
A DSCR below 1.0 means the property doesn't generate enough income to cover the loan. You'll need to make up the difference from other income. Most lenders won't finance properties below 1.0 DSCR.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.