Debt Service Coverage Ratio (DSCR)

Debt Service Coverage Ratio Calculator

Debt Service Coverage Ratio (DSCR)

A debt service coverage ratio, or DSCR, is a measurement of an entity’s cash flow vs. its debt obligations. In multifamily and commercial real estate, that entity is typically an income-producing property, while in corporate finance, the entity is usually a business or corporation. If an entity has a DSCR less than 1, its income is less than its monthly debt obligations. In contrast, if an entity has a DSCR of 1, then its income is equal to its monthly debt obligations, while if it has a DSCR of more than 1, its income is greater than its monthly debts.

DSCR in Relation to Multifamily and Commercial Real Estate Loans

When a lender is evaluating a borrower for a multifamily or commercial real estate loan, DSCR is one of the most important factors that they will take into account. This is because it’s one of the best predictors of whether a borrower will be able to pay back a loan on time. In most cases, lenders prefer properties with DSCRs of 1.20x or more, though the required DSCR will typically depend on the financial strength of the borrower, the type of property in question, and other factors. For instance, while multifamily apartment properties may need a minimum DSCR of 1.20x to qualify for funding, riskier property types, such as hotels or self-storage facilities, may need a DSCR of 1.40x- 1.50x in order to qualify.

What Is the Formula for DSCR?

In order to calculate DSCR for a commercial or multifamily property, you can use the formula: Net Operating Income ÷ Debt Obligations. While this may seem simple, it’s essential to make sure you have the correct numbers before utilizing the formula.

In general, Net Operating Income (NOI) for the DSCR formula is calculated using EBITDA (earnings before interest, tax, depreciation, and amortization), so it’s essential to understand this when calculating the DSCR for your property or business. For example, if a property had a NOI of $1,000,000, and an annual debt obligation of $850,000, it would have a DSCR of:

$1,000,000 ÷ $850,000 = 1.18x DSCR

DSCR on a 1-4 Unit Rental Property

DSCR loans for single-family rentals and 2-4 unit buildings use a simpler version of the ratio. There is no NOI. The lender divides the gross monthly rent by the full monthly payment, called PITIA: principal, interest, property taxes, insurance and any HOA dues.

Rental DSCR = monthly rent ÷ monthly PITIA

Say a duplex rents for $2,400 a month in total. The loan's principal and interest come to $1,650, taxes are $3,360 a year ($280 a month), insurance is $1,440 a year ($120 a month) and there is no HOA. PITIA is $2,050, so the DSCR is $2,400 ÷ $2,050, or 1.17x.

Because vacancy, management and repairs are not subtracted first, the same house would show a lower ratio under the commercial NOI formula above. That is part of why DSCR loans can qualify a rental that a bank's debt-to-income test would turn down: your W-2s, pay stubs and tax returns are not part of the math.

Rental DSCR Calculator

What a DSCR Rental Loan Requires

The DSCR program Janover Capital places 1-4 unit rentals with publishes these terms, as of October 24, 2026:

• Minimum DSCR: 1.05x. A rent of $2,400 supports a PITIA of up to about $2,286.

• Rent the lender uses: for a leased unit, the lower of the lease and the appraiser's market rent; for a vacant unit, 90% of market rent. A purchase can be vacant, and on a 2-4 unit refinance one unit can be vacant.

• Leverage: up to 80% loan-to-value on a purchase or rate-and-term refinance, 75% on a cash-out refinance. Owned under 90 days, the loan is sized on your total cost basis instead of value.

• Loan size and term: $75,000 to $2,000,000, 30 years, fixed or adjustable, with partial interest-only available.

• Borrower: 660 minimum credit score, an LLC or corporation, full recourse, no landlord experience required. Foreign nationals are eligible up to 65% LTV.

• Property: single family, 2-4 units, townhomes, PUDs and warrantable condos that nobody in your group lives in. Not rural properties, and not in North Dakota, South Dakota or Vermont.

If the ratio comes up short, the usual fixes are a larger down payment, which lowers principal and interest, or an appraisal that supports a higher market rent. To run a duplex, triplex or fourplex unit by unit, use the 2-4 unit rental calculator. For apartment buildings of five units or more, the commercial formula and the lender's underwritten NOI apply instead; the DSCR calculator covers both.

Check a Rental

Send the property and your rough credit score. A person checks it against the program terms and replies by email. Sending it does not pull your credit.

Different Kinds of DSCR Calculations

There are a couple unique types of DSCR calculations beyond those explained above. They are used in a few different types of loans and sometimes for different types of borrowers.

Business DSCR for SBA 7(a) and SBA 504 Loans

If you’re interested in CMBS financing for a multifamily or commercial property, lenders will typically only look at the asset at hand, in this case, the multifamily or commercial property you want to purchase or refinance. However, if you want SBA 7(a) or SBA 504 loan to purchase owner-occupied commercial real estate, lenders will focus on the DSCR of your business itself, rather than the property. While it’s true that you can rent out a certain part of your property out to tenants (between 40% and 49% of the property for SBA 504 loans), this is much less important than the actual profitability of your business itself.

Regular DSCR vs. Global DSCR

For small business commercial property loans, as well as for smaller multifamily loans, many lenders may take into account something called global DSCR. This simply means that they will use a borrower’s personal income and debts (in addition to the property’s income and debts) in order to calculate DSCR. This can be very beneficial, or very frustrating, depending on the personal financial strength of the individual in question. For instance, someone with a high income and few personal debts may see that their global DSCR is much higher than their property or business DSCR, while someone with a low income and a lot of credit card debt would see their DSCR greatly decline using this calculation.

To learn more about your multifamily loan options, fill out our quote form to speak to a specialist.