Quick Answer
DSCR = Monthly Rent ÷ Total Monthly Debt where debt = mortgage (PITI) + HOA + other property debt. Example: $3,500 rent ÷ $2,800 debt = 1.25 DSCR. A ratio of 1.0+ means property cash flows. 1.25+ qualifies easily. Below 1.0 means negative cash flow.
How to Calculate DSCR for Rental Property
3-Step DSCR Calculation
1
Determine Monthly Rental Income
- •Use current lease amount if property is rented
- •Get market rent analysis from lender or Zillow/Rentometer
- •For Airbnb: Use projected monthly income from AirDNA
- •Do NOT subtract vacancy or expenses - lenders use gross rent
2
Calculate Total Monthly Debt Payment
- •Principal & Interest (P&I) - mortgage payment
- •Property Taxes (monthly amount)
- •Insurance (monthly amount)
- •HOA Fees (if applicable)
- •Any other property debt (2nd mortgage, etc.)
3
Divide Rent by Debt
- •DSCR = Monthly Rent ÷ Total Monthly Debt
- •Round to 2 decimal places
- •1.0 or higher = Property cash flows
- •Below 1.0 = Property loses money monthly
Complete Example
Property: 4-bed Single-Family in Phoenix
Step 1: Monthly Rental Income
$3,800/month
(Based on current lease)
Step 2: Calculate Monthly Debt
Purchase Price:$500,000
Down Payment (25%):$125,000
Loan Amount:$375,000
Interest Rate:7.0%
Principal & Interest:$2,494
Property Taxes:$350
Insurance:$180
HOA Fees:$125
Total Monthly Debt:$3,149
Step 3: Calculate DSCR
$3,800 ÷ $3,149 = 1.21
DSCR Ratio
✓ QUALIFIES FOR DSCR LOAN
• Property generates 21% more income than debt
• Monthly cash flow: $651 positive
• Meets 1.0 minimum requirement
• Qualifies for competitive rates
DSCR Interpretation Guide
1.50+
Exceptional
Property generates 50%+ more than debt. Banks love this.
1.25-1.49
Excellent
Strong cash flow cushion. Qualifies easily with best terms.
1.10-1.24
Good
Decent cash flow. Most lenders approve with standard terms.
1.00-1.09
Acceptable
Barely breaks even. Approved but may need compensating factors.
0.85-0.99
Below Breakeven
Property loses money. Some lenders accept with high down payment.
Below 0.85
Poor
Significant loss. Very hard to finance without special programs.
Common Mistakes to Avoid
✗
Subtracting vacancy or expenses from rent
✓
Use GROSS monthly rent. Lenders don't subtract anything.
✗
Forgetting HOA fees in debt calculation
✓
Always include HOA in total debt if property has HOA.
✗
Using annual numbers instead of monthly
✓
DSCR must be calculated with monthly numbers only.
✗
Not including property taxes or insurance
✓
Always use PITI (Principal, Interest, Taxes, Insurance).
✗
Using your estimate instead of market rent
✓
Lenders require official market rent analysis or actual lease.
Use Our Free DSCR Calculator
Calculate your property's DSCR instantly. Enter property details and get immediate results with qualification status.