Debt Service Coverage Ratio
Calculator
Results
- Debt service coverage ratio
- 1.3
- Annual cash flow
- 60,000
- Cushion over debt service (%)
- 30
Property management results
| Debt service coverage ratio | 1.3 |
| Annual cash flow | 60,000 |
| Cushion over debt service (%) | 30 |
formula-map diagram
- Debt service coverage ratio
- 1.3
- Annual cash flow
- 60,000
- Cushion over debt service (%)
- 30
Property management relationship
Formula
DSCR = net operating income ÷ annual debt service= 1.3
Note
This is a simplified model: it applies the standard property-management definition to the numbers you entered. Rent affordability uses a flat share-of-income rule and ignores credit history, local screening criteria and household size. Proration assumes a plain daily rate; your lease or local law may prescribe a different convention (for example a fixed 30-day month). Security-deposit interest is simple interest at the rate you enter, while many jurisdictions set the rate, the compounding and the payout schedule by statute. Income, expense, reserve and escalation figures are straight-line and assume the amounts you enter hold steady; they ignore taxes, depreciation, financing changes, capital events, inflation and market turnover. Lease buyout compares the contractual penalty with the remaining rent only and is not a reading of your lease. These results are general information, not legal, tax or investment advice: check your lease and local tenancy law and consult a qualified professional before acting.
More in Property management
See all →Frequently asked questions
What does the debt service coverage ratio (DSCR) tell a lender?+
DSCR is net operating income divided by total annual debt service (principal and interest), and it measures how many times over the property's income covers its loan payments. A DSCR of 1.25 means the property generates 25% more income than it needs to make its debt payments.
What DSCR do lenders typically require?+
Most commercial and investment-property lenders require a minimum DSCR between 1.20 and 1.35, though riskier property types or borrowers may face higher thresholds. A DSCR below 1.0 means the property's income doesn't even cover the debt payment, which lenders will not underwrite.
Does DSCR include principal repayment or only interest?+
Standard DSCR uses total debt service, meaning both the interest and the principal portion of the loan payment, not just interest. Using interest-only figures on an amortizing loan will overstate the ratio and understate real repayment risk.
How does an interest-only period affect the debt service coverage ratio?+
During an interest-only period, debt service is lower because no principal is being repaid, so DSCR will look artificially strong. Lenders often stress-test the ratio using what DSCR would be once amortization begins, to make sure the property can still cover payments after the interest-only period ends.
Can DSCR be improved without increasing rents?+
Yes — refinancing to a lower interest rate or longer amortization reduces annual debt service and raises DSCR, and cutting controllable operating expenses raises NOI, which also raises DSCR. Both routes are common ways operators improve coverage between rent increases.