Evaluate Your Debt Service Coverage Ratio (DSCR)

Income & Loan Details
Results
Net Operating Income (NOI): $0 per year
Debt Service: $0 per year
Debt Service Coverage Ratio (DSCR): 0 x
Your DSCR ratio is below 1.0. You may be at risk of not being able to cover debt obligations. It's important to improve your financial position.
Description
This Debt Service Coverage Ratio (DSCR) Calculator helps determine whether a property or business is generating sufficient income to cover loan repayments. A higher DSCR indicates a lower level of risk for lenders.
Calculating the DSCR
The formula for the debt-service coverage ratio requires net operating income and the total debt servicing for a company.
Here’s how each value is calculated:
  • Gross Operating Income: The total income generated by the property before any expenses.
  • Vacancy Loss: A percentage reduction in income due to vacant units or rental downtime.
  • Operating Expenses: A percentage of gross operating income deducted to account for property maintenance, management, and other costs.
  • Net Operating Income (NOI):The income remaining after deducting vacancy loss and operating expenses, calculated as:
    NOI = Gross Operating Income × (1 - Vacancy Loss%) × (1 - Operating Expenses%)
  • Loan Amount (P): The total loan taken for the property.
  • Loan Term (n): The number of years over which the loan is repaid.
  • Annual Interest Rate (r): The yearly interest rate applied to the loan.
  • Debt Service: The total annual debt obligation, including both principal and interest payments, calculated using the loan amortization formula:
    Debt Service = (P × r) / (1 - (1 + r/12)-12 × n)
  • Debt Service Coverage Ratio (DSCR):The ratio of net operating income to debt service, calculated as:
    DSCR =
    NOI

    Debt Service
A DSCR above 1.0 indicates that the property generates enough income to cover its debt payments. A DSCR of 1.25 or higher is typically preferred by lenders, as it suggests a safer investment.