Debt Service Coverage Calculator
Calculate debt service coverage ratio for properties
About this calculator
The Debt Service Coverage Calculator determines the debt service coverage ratio (DSCR) for investment properties by comparing net operating income to total debt payments. This critical financial metric helps real estate investors and lenders assess whether a property generates sufficient income to cover its mortgage obligations. A DSCR above 1.0 indicates positive cash flow, while ratios below 1.0 suggest the property may struggle to meet debt obligations, making this tool essential for investment decisions and loan approvals.
How to use
Enter your property's annual net operating income (rental income minus operating expenses) and total annual debt service (mortgage principal and interest payments). The calculator will instantly compute your debt service coverage ratio. Compare the result to lender requirements, typically 1.20-1.25 for investment properties.
Frequently asked questions
What is a good debt service coverage ratio?
Generally, a DSCR of 1.20 or higher is considered good for investment properties, indicating strong cash flow to cover debt payments.
How do I calculate net operating income?
Subtract all operating expenses (taxes, insurance, maintenance, management fees) from your gross rental income, excluding mortgage payments.
Why do lenders require DSCR calculations?
Lenders use DSCR to assess loan risk and ensure borrowers can reliably make mortgage payments from property income.