DSCR Calculator

Most lenders require a minimum DSCR of 1.20x to 1.25x for commercial real estate loans. A DSCR above 1.25x is considered strong, while 1.50x or higher gives borrowers the best rates and terms. SBA loans may accept 1.15x, while construction loans often require 1.30x or higher on projected stabilized income.

DSCR is calculated by dividing the property's Net Operating Income (NOI) by its annual debt service (total loan payments including principal and interest). For example, if NOI is $150,000 and annual debt service is $120,000, the DSCR is 1.25x.

A DSCR below 1.0x means the property's income does not cover its debt payments. Most conventional lenders will not approve a loan with a DSCR below 1.0x. Options include increasing NOI through higher rents or lower expenses, making a larger down payment to reduce the loan amount, or seeking alternative financing such as bridge loans.

Standard DSCR calculations use Net Operating Income (NOI), which does not include reserves or capital expenditures. However, some lenders — particularly life insurance companies and CMBS — may underwrite to a 'stressed' NOI that deducts replacement reserves, typically $250–$500 per unit for multifamily.