Free tool and guide
DSCR calculator for commercial real estate
DSCR tells a lender whether a property's income covers its loan payments. Enter NOI and the loan terms below to get the ratio, and the largest loan a given DSCR supports.
DSCR, or debt service coverage ratio, is a property's net operating income divided by its annual debt service. At 1.25x, the property earns $1.25 for every $1.00 of loan payments. Below 1.00x, its income does not cover the debt.
DSCR calculator
Enter NOI and loan terms to get DSCR, annual debt service, and the largest loan at the DSCR you test. It runs in your browser: your numbers are not uploaded, saved or tracked, and there is no sign-up.
Showing invented example numbers
- DSCR
- 1.37x
- NOI divided by annual debt service
- Annual debt service
- $379,241
- Cash flow after debt service
- $140,759
- Largest loan at the DSCR tested
- $5,484,642
- NOI needed at the DSCR tested
- $474,051
- Debt yield
- 10.40%
Arithmetic only, with no market benchmarks. This is not a loan quote or advice.
The DSCR formula
DSCR = NOI / annual debt service. Annual debt service is twelve months of principal and interest. To size a loan, run it backward: largest loan = NOI / target DSCR / mortgage constant, where the constant is annual debt service divided by the loan.
A worked example
$520,000 of NOI against a $5,000,000 loan at 6.5% with 30-year amortization means $379,241 of debt service and a DSCR of 1.37x. Tested at 1.25x, the same NOI supports up to $5,484,642.
What moves a DSCR
- Rate. A higher rate raises debt service, so the same income supports a smaller loan.
- Amortization. A longer schedule lowers the payment and raises DSCR. Interest-only raises it more, for as long as it lasts.
- The NOI used. Lenders usually underwrite their own NOI, often lower than the seller's. Find yours with the T12 analyzer.
- Loan size. When DSCR falls short, lower proceeds are the usual answer, which means more equity.
What DSCR do lenders require?
It varies by lender, property type, loan program and market, so ask yours. The 1.25x default in this calculator is an example only, and you can change it. Lenders also often size to loan-to-value and debt yield, and the lowest result wins.
Commercial DSCR and "DSCR loans"
Many search results for DSCR are about residential investor loans, which qualify a rental on its rent and not the borrower's income. The ratio is similar, but those programs set their own definitions. This page is about commercial property underwriting, where the numerator is usually NOI.
Frequently asked
- How do you calculate DSCR?
- Divide net operating income by annual debt service. $520,000 of NOI against about $379,000 of debt service is about 1.37x.
- What does a DSCR of 1.25 mean?
- The property's NOI is 1.25 times its annual loan payments, leaving a 25% cushion before income falls short of the debt.
- What happens if DSCR is below 1?
- NOI does not cover the payments, so the owner must fund the gap from elsewhere. It can also breach a covenant in an existing loan.
- Does DSCR use NOI or cash flow?
- Commercial underwriting usually uses NOI, often after lender adjustments such as reserves. Check your lender's definition.
Keep reading
Commercial mortgage calculator
Payment, balloon, LTV and DSCR for a commercial loan.
Debt yield calculator
The lender's rate-free test of a loan's size.
T12 analyzer
Find the real NOI: total a T12 and flag what does not add up.
Pacific Software Ventures built this tool and guide, and sells AI consulting and training to commercial real estate firms. This is general education, not investment, legal or tax advice.
Next step
Doing this on every deal? Let AI do the first read.
Ten minutes. An honest read on where AI would save your team time, and which option fits, including when it is not us.