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Debt Service Coverage Ratio Calculator.

Calculate net operating income divided by annual debt service.

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DSCR: 1.5

DSCR

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FAQs

How is Debt Service Coverage Ratio calculated?

Debt-service and NOI definitions vary; inputs remain explicit.

Use Cases

Assess Loan Eligibility

Use the DSCR to evaluate whether your business or rental property generates enough income to qualify for a loan. Lenders often use this metric to determine borrowing capacity.

Example: A property with NOI of $150,000 and annual debt service of $120,000 has a DSCR of 1.25, which may meet lender requirements.

Monitor Financial Health

Regularly calculate your DSCR to track your ability to meet debt obligations over time. A declining ratio may signal financial stress, prompting proactive adjustments.

Example: If your DSCR drops from 1.5 to 1.1, you might consider refinancing or increasing income.

Frequently Asked Questions

What is the Debt Service Coverage Ratio (DSCR)?
DSCR measures a company's or property's ability to cover its debt obligations using its net operating income. It is calculated by dividing net operating income by annual debt service. A ratio above 1 indicates sufficient income to cover debt payments.
How do I calculate DSCR?
Enter your net operating income (NOI) and annual debt service (total yearly debt payments including principal and interest). The calculator divides NOI by annual debt service to give your DSCR. For example, if NOI is $120,000 and annual debt service is $100,000, DSCR is 1.2.
What is a good DSCR?
Lenders typically prefer a DSCR of 1.2 or higher, though requirements vary. A ratio below 1 means your income is insufficient to cover debt payments, indicating higher risk. This calculator helps you quickly assess your current ratio.

Tips & Common Mistakes

Tips

  • Ensure net operating income is calculated after operating expenses but before debt service and taxes.
  • Annual debt service should include both principal and interest payments for all debts being considered.
  • Use consistent time periods: if NOI is annual, use annual debt service; if monthly, use monthly debt service.
  • Compare your DSCR to industry benchmarks or lender requirements to gauge financial strength.

Common Mistakes to Avoid

  • Using gross income instead of net operating income, which overstates the ratio.
  • Forgetting to include all debt payments, such as secondary loans or leases, in annual debt service.
  • Mixing time periods, like using monthly debt service with annual NOI, leading to incorrect results.

Last updated: August 13, 2026