DSCR (debt service coverage ratio)

DSCR loans size the loan off the property's rent instead of your personal income. That makes them a common exit for BRRRR investors and anyone who holds several rentals.

How to calculate it

Divide the monthly rent by the full monthly payment: principal, interest, taxes, insurance and HOA (PITIA). In Run The Deal, DSCR = qualifying rent / PITIA. Some lenders use an NOI based version instead, so ask which one yours uses.

What the number means

• Above 1.0: the rent covers the payment with room to spare.
• Exactly 1.0: the rent covers the payment and nothing more.
• Below 1.0: the rent does not cover the payment. Some lenders offer no-ratio programs at a lower LTV.

Run The Deal's illustrative DSCR cash-out program uses a 1.0 minimum with pricing tiers at 1.25 and up, 1.10 to 1.25, and 1.00 to 1.10, where lower tiers carry a higher rate. A separate below 1.0 or no-ratio program is modeled at 65% LTV. These are planning assumptions. Real terms vary by lender.

Common mistakes

• Leaving HOA or flood insurance out of the payment. Both count.
• Using short-term rental gross bookings at face value. Many lenders haircut STR income; the app uses 75% by default.
• Forgetting that DSCR is not cash flow. A 1.25 DSCR can still lose money after vacancy, repairs and capex.

Check your ratio with the DSCR calculator and read the DSCR loan requirements guide for more detail.