Free Calculator

DSCR Calculator Debt Service Coverage Ratio

Calculate whether your property generates enough income to cover debt payments. Instant results with lender requirement benchmarks.

Enter Your Numbers

$

Gross income minus operating expenses (before debt service)

$

Total annual principal + interest payments

Your DSCR

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Enter your numbers to calculate DSCR

Lender Requirements

Multifamily 1.20 - 1.25
Retail / Office 1.25 - 1.35
Industrial 1.20 - 1.30
SBA Loans 1.15 - 1.25

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What is DSCR?

DSCR (Debt Service Coverage Ratio) measures a property's ability to cover its debt payments from operating income. It's one of the most important metrics lenders use to evaluate commercial real estate loans.

// DSCR Formula
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service

Understanding the Result

< 1.0
Negative Cash Flow

Property doesn't cover debt. Loan unlikely to be approved.

1.0 - 1.20
Marginal

Tight coverage. May need guarantees or lower LTV.

> 1.25
Strong

Healthy cushion. Meets most lender requirements.

Example Calculation

A 50-unit multifamily property generates $600,000 in annual NOI. The acquisition loan has annual debt service of $450,000.

DSCR = $600,000 ÷ $450,000 = 1.33

A DSCR of 1.33 means the property generates 33% more income than needed to cover debt payments. This provides a comfortable cushion and would meet most lender requirements for multifamily.

Why DSCR Matters

  • Loan qualification: Lenders use DSCR as a primary approval criterion. Below minimum = no loan.
  • Pricing impact: Higher DSCR may qualify for better interest rates or higher LTV.
  • Ongoing covenants: Many loans require maintaining minimum DSCR throughout the term.
  • Risk assessment: DSCR shows how much room you have if income drops or expenses rise.

Frequently Asked Questions

What is a good DSCR for commercial real estate?

Most commercial lenders require a minimum DSCR of 1.20-1.25 for conventional loans. Some asset classes may require higher ratios: multifamily (1.20-1.25), retail (1.25-1.30), office (1.25-1.35). SBA loans may accept DSCRs as low as 1.15.

What happens if DSCR is below 1.0?

A DSCR below 1.0 means the property doesn't generate enough income to cover debt payments. This is a red flag for lenders and typically means the loan won't be approved without additional collateral, guarantees, or a lower loan amount.

How can I improve my DSCR?

You can improve DSCR by: (1) increasing NOI through higher rents or lower expenses, (2) reducing debt service by putting more equity down, (3) getting a lower interest rate, or (4) using a longer amortization period. Each approach has trade-offs.

Is DSCR the only metric lenders look at?

No. Lenders also evaluate LTV (loan-to-value), debt yield, borrower credit and experience, property quality, market conditions, and tenant quality. DSCR is just one piece of the underwriting puzzle, though it's often the most important.

Automate your underwriting

Primer extracts NOI, expenses, and rent data from any document format. Calculate DSCR automatically from source documents.

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