Calculate Your Investment Property DSCR
TL;DR: To calculate DSCR, divide the property's monthly rent by its full monthly payment: principal, interest, taxes, insurance and association dues. A result above one means the rent covers the payment. Lender partners set their own guidelines and may count income differently. A calculator result is a planning tool, not a quote.
What is the DSCR formula?
DSCR, or debt service coverage ratio, compares what a rental earns with what it costs to carry. Divide gross monthly rent by the monthly payment, called PITIA: principal, interest, taxes, insurance and association dues. The result shows whether the property can carry its own payment. Lender partners decide which rent figure and payment they use.
DSCR = gross monthly rent ÷ monthly PITIA
What counts as income
Income is the rent the lender partner accepts for underwriting, not necessarily what you hope to collect. For a long-term rental, that is usually the lease rent or the appraiser's market rent. A short-term rental may use booking history or market projections. A small apartment building usually starts from the rent roll and operating history.
- Long-term rental: lease rent or appraised market rent. See vacant rental DSCR.
- Short-term rental: history or projections. See short-term rental DSCR.
- Small apartment building: rent roll and a trailing operating statement (requirements vary by lender). See small apartment buildings.
What counts as the payment
The payment side includes every cost a lender partner treats as fixed debt service on the property. That means principal and interest on the new loan, property taxes, hazard and any required flood insurance, and association dues. Use the tax bill you'll pay after closing, not the seller's, and a real insurance quote.
| Item | Included? |
|---|---|
| Principal and interest | Yes |
| Property taxes | Yes |
| Insurance | Yes |
| Association dues | Yes, if any |
| Repairs and upgrades | Usually not |
How to use the calculator
The calculator gives you a quick planning estimate. Enter monthly rent, an estimated loan amount and term, a what-if payment, taxes, insurance and dues. Run it with conservative rent, then again with realistic costs. If the result is tight, test a larger down payment or a different structure before you write an offer.
How to read your result
A higher result means more cushion. A result near one means the rent barely covers the payment, and a result below one means it doesn't. Lender partners set their own guidelines, and some programs accept thinner coverage with other conditions. Treat the number as the opening of a conversation, not a pass or fail.
Why coverage matters to you, not just the lender
Coverage is a risk check for your own portfolio. A rental with thin coverage leaves little room for a vacancy, a repair or a tax increase. Running the math before you buy shows which deals can carry themselves and which depend on everything going right. It also helps a broker match the file to the right lender partners.
Example only (story)
Example only, no numbers, not an offer. Priya finds a townhouse and runs the calculator using the listing's rent. The result looks strong. Her broker asks her to rerun it with the appraiser-style market rent, the post-sale tax bill and a real insurance quote. The coverage tightens, so she increases her down payment before offering. The appraisal later supports the rent and the file moves smoothly. Terms depend on the file and lender partner.
Common mistakes
Calculator errors usually come from the inputs, not the math. Investors use asking rent instead of market rent, plug in the seller's tax bill, leave out association dues or guess at insurance. Some treat a strong result as an approval. Each mistake makes coverage look better on paper than it will look in underwriting.
- Using asking rent instead of supportable market rent
- Forgetting association dues
- Using the seller's tax bill
- Treating the result as a quote
Questions to ask a lender partner
Ask each lender partner which rent figure it uses, whether it uses the interest-only or full payment when relevant, how it treats short-term income, which costs it includes in the payment and how thin a result it will consider. Compare the answers side by side. Requirements vary by lender.
Key takeaways
- DSCR is rent divided by the full monthly payment.
- Use supportable rent and real costs.
- Lender partners set their own guidelines.
- A calculator result is not a quote or an approval.
Frequently asked questions
What is the DSCR formula?
Gross monthly rent divided by monthly principal, interest, taxes, insurance and association dues.
What counts as income in DSCR?
The rent the lender partner accepts, usually lease rent or appraised market rent, or short-term history for short-term rentals.
What DSCR do lenders want?
It varies by lender partner and program. A result above one means the rent covers the payment. Requirements vary by lender.
Is the calculator a loan quote?
No. It's a planning tool. Only a lender partner can issue terms after underwriting.
Next step
Ready to talk through your rental? Start a scenario at /apply or text LOAN to (480) 485-1229. A broker reviews the property, the rent and your goal, then compares lender partners. Investment property only. Not a commitment to lend; requirements vary by lender.