DSCR measures whether a property earns enough to cover its own mortgage. It's the single number a "DSCR loan" is built on — and it's how investors get financed on a property's cash flow instead of their personal income.
Calculate NOI & cash flow free →Net operating income (NOI) is rental income after operating expenses but before the mortgage. Annual debt service is your yearly mortgage principal + interest. A DSCR of 1.0 means the property exactly covers its mortgage; above 1.0 it produces a surplus; below 1.0 it runs a shortfall you cover out of pocket.
| DSCR | What it means |
|---|---|
| 1.25+ | Strong — qualifies for the best DSCR-loan pricing and leverage. |
| 1.0 – 1.25 | Acceptable to many lenders; expect a higher rate or larger down payment. |
| Below 1.0 | Shortfall. Some "no-ratio" lenders still lend, but with more down, higher rates, and cash reserves. |
Most DSCR lenders also want cash reserves (often ~6 months of payments). Exact thresholds vary by lender — treat 1.20–1.25 as the common target for good terms.
A $200,000 rental brings in $2,100/mo. After vacancy and operating expenses its NOI is about $16,031/yr. Financed with 20% down at 7% over 30 years, the mortgage is $1,064.48/mo = $12,774/yr in debt service.
A lender requiring 1.25 would approve this deal. If the rent or NOI dropped so that NOI equaled $12,774, the DSCR would be exactly 1.0 — the property would only break even on its mortgage.