Debt Service Coverage Ratio Calculator
Calculate DSCR for commercial real estate financing
About this calculator
The Debt Service Coverage Ratio (DSCR) Calculator helps commercial real estate investors and lenders evaluate a property's ability to generate sufficient cash flow to cover its debt obligations. This critical financial metric compares net operating income to annual debt service payments, helping determine loan eligibility and investment viability. A DSCR above 1.0 indicates the property generates enough income to cover debt payments, while ratios below 1.0 suggest potential cash flow issues. Lenders typically require minimum DSCR ratios of 1.20-1.35 for commercial real estate financing approval.
How to use
Enter the property's annual net operating income (NOI), which is gross rental income minus operating expenses. Then input the total annual debt service, including principal and interest payments on all loans. The calculator will instantly compute your DSCR by dividing NOI by annual debt service, showing whether the property meets typical lender requirements for commercial financing.
Frequently asked questions
What is a good DSCR for commercial real estate?
Most commercial lenders require a minimum DSCR of 1.20-1.35, meaning the property generates 20-35% more income than needed for debt payments.
How do I calculate net operating income (NOI)?
NOI equals gross rental income minus operating expenses like taxes, insurance, maintenance, and management fees, but excludes mortgage payments and depreciation.
Can I use DSCR for residential investment properties?
Yes, DSCR is applicable to residential rental properties and helps evaluate cash flow sustainability for any income-producing real estate investment.