DSCR Calculator

Quick summary

The Debt Service Coverage Ratio (DSCR) is the single number that decides whether a rental property qualifies for an investor loan — and at what rate. It tells you, and the lender, how comfortably the rent covers the mortgage.

Formula: DSCR = Net Operating Income (NOI) ÷ Annual Debt Service. A DSCR of 1.00 means the rent exactly covers the mortgage; 1.25 means rent is 25% more than the mortgage; 1.50+ unlocks the best non-QM lender pricing.

This calculator returns DSCR, monthly NOI, monthly cash flow, cap rate (NOI ÷ price), and GRM (price ÷ annual rent) — the four metrics every BRRRR, buy-and-hold, or short-term-rental investor should know before making an offer in 2026.

Gross monthly rent

Vacancy rate

Monthly operating expenses

Tax + insurance + mgmt + repairs + HOA

Monthly P&I (proposed loan)

Purchase price (for cap rate)

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How to use

1 Enter the gross monthly rent the property currently produces (or comparable market rent if vacant — Rentometer, Zillow Rental Manager, or AirDNA for STRs).
2 Set vacancy rate (national average ~6-8%; STRs and Class-C properties run 10-15%).
3 Enter total monthly operating expenses: property tax, insurance, HOA, property management (8-10% of rent), repairs/maintenance reserve (5-10%), utilities if owner-paid.
4 Enter the proposed monthly mortgage P&I (use a separate mortgage calculator at the DSCR loan rate, currently 6.5-7.5% in 2026).
5 Enter purchase price to also see cap rate and GRM. Click Calculate to see all five metrics and the lender qualification verdict.

2026 DSCR Loan Tiers — What Each Number Means

Non-QM DSCR lenders price by ratio band. Hitting 1.25 is the sweet spot; 1.50+ gets you institutional rates near conventional.

DSCR	Lender Verdict	2026 Rate Band	Down Payment
≥ 1.50	Excellent — best pricing	6.125% - 6.75%	20%
1.25 - 1.49	Strong — most programs qualify	6.50% - 7.25%	20-25%
1.00 - 1.24	Borderline — rate premium	7.25% - 8.50%	25-30%
0.75 - 0.99	Negative cash flow — limited lenders	8.50% - 9.50%	30-40% + reserves
< 0.75	Most lenders decline	—	—

DSCR vs Conventional Investor Loan

DSCR loans qualify the property, not the borrower — no W-2, no tax returns, LLC ownership allowed, unlimited financed properties. Trade-off: rates run 0.5-1.5% above conventional. Conventional Fannie/Freddie investor loans require personal income docs but allow up to 10 financed properties at lower rates.

Feature	DSCR (Non-QM)	Conventional Investor
Income Documentation	None — uses property cash flow	Full W-2 + tax returns + DTI
LLC Ownership	Yes	No (personal name only)
Property Limit	Unlimited	10 financed (Fannie cap)
Min Down	20-25%	15-25%
2026 Rate	6.5-8.5%	6.5-7.0%
Min Credit Score	620-660	620-680

Cap Rate and GRM — Other Investor Metrics

Cap Rate = NOI ÷ Purchase Price. Compares yield across properties regardless of financing. 2026 US averages: multifamily 5.5-6.5%, retail 6.5-7.5%, office 7.5-9% (CBRE Q1 2026). GRM (Gross Rent Multiplier) = Price ÷ Annual Gross Rent. Lower is better; 8-12 is the typical buy-zone for cash-flowing markets, 15+ flags appreciation-only plays.

Reserve and Down Payment Requirements

Most DSCR lenders require 3-12 months of PITI in reserves after closing — proven via bank statements. Down payment is typically 20-25% on 1-4 unit residential, 25-30% on 5+ unit commercial. Foreign nationals pay roughly 0.75% rate premium plus 30-35% down.

FAQ

Q What is a DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan is a non-QM mortgage for real estate investors that qualifies based on the property's rental income, not your personal W-2 or tax returns. Most lenders require a DSCR of 1.0+ to qualify and 1.25+ for the best rates.

Q How do I calculate DSCR for a rental property?

DSCR = Net Operating Income (NOI) ÷ Annual Debt Service. NOI is gross rent minus vacancy minus operating expenses (taxes, insurance, management, maintenance). Annual debt service is your mortgage P&I × 12. A DSCR of 1.25 means rent covers 125% of mortgage payments.

Q What is a good DSCR ratio in 2026?

1.00 = breakeven (rent equals mortgage); 1.25 = the industry standard floor for best DSCR loan rates; 1.50+ = excellent and unlocks the lowest non-QM pricing (typically 6.125-6.75% in May 2026).

Q What's the minimum down payment for a DSCR loan?

20% is typical for 1-4 unit residential; 25-30% for 5+ unit commercial. Borrowers below 1.0 DSCR may need 30-40% down. Foreign nationals typically need 30-35% plus a 0.75% rate premium.

Q Can I get a DSCR loan in an LLC?

Yes — most DSCR lenders allow and even prefer LLC ownership. This is one of the key advantages over conventional Fannie/Freddie investor loans, which require personal name. LLC ownership protects personal assets and simplifies multi-property portfolios.

Q How is DSCR different from cap rate?

DSCR includes financing (mortgage P&I) — it tells you whether the property pays for itself with debt. Cap rate is unlevered — it's NOI ÷ purchase price and ignores how you finance it. Use cap rate to compare properties; use DSCR to qualify for the loan.

Q What expenses count toward DSCR calculation?

Operating expenses: property tax, insurance, HOA, property management (8-10% of rent typical), maintenance reserve (5-10%), utilities if owner-paid, lawn/snow service, vacancy allowance (6-12%). Mortgage P&I is NOT in NOI — it's the debt service in the denominator.

Q Does short-term rental income count for DSCR?

Yes, but lenders use either AirDNA market projections or 12-month actual booking history (preferred). STR-friendly DSCR lenders typically apply a 25-30% haircut to revenue to account for higher vacancy and seasonality. Pure long-term lease comps may lower your qualifying DSCR.