DSCR Calculator

DSCR measures how many times a property's net operating income covers its annual loan payments. It is the first number a commercial lender looks at.

DSCR = NOI ÷ annual debt service

Example: $150,000 of NOI against $107,900 of annual principal and interest gives a DSCR of 1.39×. The property earns 39% more than it needs to make the payments.

• Agency multifamily (Fannie Mae, Freddie Mac): 1.20× to 1.25×
• Bank and credit-union commercial loans: 1.25× to 1.35×
• CMBS and life-company loans: 1.25× to 1.50×
• Hotels, self-storage and other operating businesses: 1.40× or higher
• DSCR loans on 1–4 unit rentals: often 1.00× to 1.25×, but usually calculated on gross rent over the full mortgage payment including taxes and insurance, so the numbers are not comparable

Minimums rise when rates rise or a market looks weak. Ask the lender how they define NOI; most underwrite their own vacancy, management and reserves rather than taking the seller's figures.

Work backwards. Divide NOI by the required DSCR to get the most annual debt service the property can support, then find the loan whose payments equal that figure at the quoted rate and amortization. This calculator shows the result as the maximum loan at your target DSCR.

Lenders also cap the loan by loan-to-value and often by debt yield. The lowest of the three constraints sets the loan amount. With today's rates the DSCR test usually binds before LTV does.

Debt yield is NOI divided by the loan amount. It tells a lender what return they would earn if they had to take the property back, independent of interest rate or amortization.

Most institutional lenders want 8% to 10% or better. Because it ignores the loan terms, debt yield cannot be improved by stretching amortization or taking an interest-only period, which is exactly why lenders like it.

Usually not. Even when a loan starts with an interest-only period, most lenders underwrite coverage on the full amortizing payment so the deal still works once principal kicks in. Some bridge and agency programs size on the interest-only payment; if yours does, switch this calculator to interest-only to match.

NOI no longer covers the payments and the owner funds the shortfall from their own pocket. Many loan agreements include a DSCR covenant; falling below it can trigger a cash sweep, a requirement to pay down principal, or technical default. Refinancing also becomes difficult because a new lender sizes the loan on current NOI.

Use the sensitivity rows to see how much NOI can slip, or how far rates can rise at refinance, before coverage breaks.

DSCR is the lender's view: can the income service the debt? Cash-on-cash is the investor's view: what does the cash left after debt service earn on the equity invested? A deal can have strong DSCR and a poor cash-on-cash return if too much equity went in, or the reverse. The Cash-on-Cash Calculator takes the same loan and shows the return side.