What DSCR measures
Debt service coverage ratio, or DSCR, compares annual net operating income with annual debt service.
The formula is DSCR = annual NOI ÷ annual debt service.
A result of 1.25x means the modeled NOI is 1.25 times the modeled annual debt payment. A result below 1.00x means modeled NOI is lower than debt service. The ratio is a coverage measure, not a complete underwriting decision.
Use consistent annual inputs
The cleanest inputs are annual NOI and annual debt service from the same scenario and period. DealYield also supports a monthly estimate when the direct annual inputs are cleared and all three monthly fields are completed:
- Monthly rent
- Monthly operating expenses
- Monthly mortgage payment
The calculator annualizes (monthly rent − monthly expenses) for estimated NOI and multiplies the monthly mortgage payment by 12 for estimated annual debt service.
Direct annual inputs take precedence when they are present. Keeping the source visible prevents the calculator from silently mixing two different scenarios.
Worked example
Assume annual NOI of $75,000 and annual debt service of $60,000.
DSCR is $75,000 ÷ $60,000 = 1.25x.
At an editable 1.25x target, this example is exactly at the selected threshold. The maximum annual debt service at that target is $75,000 ÷ 1.25 = $60,000, and the corresponding monthly amount is $5,000.
If NOI fell to $69,000 while debt service remained $60,000, DSCR would become 1.15x. Sensitivity analysis makes that relationship visible without changing the underlying formula.
Why 1.25x is only an example
DealYield pre-fills 1.25x as an editable educational example. It is not a universal lender rule and does not determine qualification. Requirements can vary by lender, loan program, property type, market, borrower, amortization, interest-only structure, and other underwriting factors.
The calculator’s pass or caution state compares the result only with the threshold entered by the user. It does not represent approval, denial, pricing, or a commitment to lend.
Zero debt service and unavailable ratios
When annual debt service is zero, the ratio denominator is zero. The calculator shows DSCR as unavailable rather than infinity. Target-related outputs may still be available where their own formulas have valid inputs.
This safe state matters because a mathematically infinite label could be mistaken for a meaningful underwriting result.
What DSCR does not capture
The ratio does not by itself model:
- Borrower income, credit, liquidity, or net worth
- Loan-to-value or collateral requirements
- Future interest-rate changes
- Balloon balances or refinance risk
- Capital projects and unmodeled reserves
- Tax effects or property appreciation
- Lender-specific definitions of NOI and debt service
Review the NOI guide before using a coverage ratio, and use the Mortgage Payment calculator when you need to inspect payment phases, interest, fees, or loan balance.
Reviewing a DSCR result
- Confirm that NOI and debt service use the same annual period.
- Verify whether the loan has an interest-only phase or a later payment change.
- Audit the expenses and vacancy behind NOI.
- Keep the selected threshold visible and editable.
- Stress-test lower NOI rather than relying on one estimate.
- Compare the calculation with the lender’s actual definitions and documentation.
DSCR output is educational and does not constitute lending advice, loan qualification, or a credit decision.