How to use this calculator
- Enter or choose gross rental income (per year).
- Enter or choose vacancy and credit loss.
- Enter or choose operating expenses (per year).
- Enter or choose loan amount.
- Enter or choose interest rate (per year).
- The dSCR updates as you type. Use Copy result or Share to keep it.
Method
NOI = Gross income × (1 − Vacancy) − Operating expenses; Debt service = 12 × P × i(1 + i)^n ÷ ((1 + i)^n − 1); DSCR = NOI ÷ Debt service; Max loan = PV of (NOI ÷ Target ÷ 12) over n months
- P
- loan amount
- i
- monthly interest rate
- n
- number of monthly payments
Worked example
- NOI = 120,000 × 0.95 − 34,000 = $80,000.
- $800,000 at 6.5% over 25 years = $5,401.66 a month, $64,819.89 a year.
- DSCR = 80,000 ÷ 64,819.89 = 1.23.
- At 1.25 the payment can be 80,000 ÷ 1.25 ÷ 12 = $5,333.33 a month, which supports a loan of $789,881.04.
The property covers its debt 1.23 times; to reach 1.25 the loan would need to be about $789,881.
What the result means
A DSCR of 1.23 means income is 23% more than the loan payments. Below 1, the owner must top up each year. If you are short of a lender’s minimum, a bigger deposit, a longer amortisation or higher rent all raise the ratio.
Assumptions and limits
- The loan is fixed-rate with level monthly payments.
- Operating expenses exclude loan payments, depreciation and income tax.
- Lenders differ on vacancy, management and reserve allowances, so their DSCR may differ from yours.
- Interest-only and adjustable-rate loans are not modelled.
Questions
What is a good DSCR?
Many commercial and investment-property lenders look for roughly 1.2–1.35, but the minimum depends on the lender, the property type and the market. Ask yours.
Is DSCR the same as cash-on-cash return?
No. DSCR compares income with loan payments; cash-on-cash compares the cash left after those payments with the cash you invested.
Please note: Returns are illustrations at a constant rate, not predictions or guarantees. Investments can lose value. This is not investment advice.