DSCR Calculator — Debt Service Coverage
Check if your property's income covers its debt. Enter NOI and loan details for instant DSCR analysis with lender requirement benchmarks.
Typical Lender Minimums
Understanding DSCR in Commercial Real Estate
📐 The Formula
DSCR = NOI ÷ Annual Debt Service
Divide the property's annual NOI by its annual mortgage payments (principal + interest). A result above 1.0x means the property generates enough income to cover its debt; below 1.0x means it doesn't.
🏦 What Lenders Look For
- 1.25x+ — Comfortable for most conventional lenders
- 1.20x — Minimum for many CMBS and agency loans
- 1.15x — Tight but acceptable for SBA programs
- < 1.0x — Cannot service debt — loan unlikely to close
⚠️ Common DSCR Mistakes
- Using gross income instead of NOI — Overstates coverage
- Ignoring IO-to-amortizing transition — DSCR drops when IO ends
- Static analysis only — DSCR changes as rents roll and rates adjust
- Forgetting reserves — Some lenders deduct reserves from NOI
📊 DSCR Over Time
DSCR isn't a one-time check — it should be projected over the full hold period. Key inflection points: lease expirations (NOI drops during vacancy), IO-to-amortizing conversion (debt service increases), and rate resets on floating-rate loans. Solsten projects DSCR year-by-year with covenant monitoring.
Worked Example
Retail Strip Center — $2M Acquisition
$168,000 ÷ $113,530 = 1.48x — comfortably above the 1.25x conventional minimum
Track DSCR Across Your Entire Hold Period
This calculator gives you today's DSCR. Solsten projects it year-by-year accounting for lease rollovers, rent escalations, IO-to-amortizing transitions, and refinance scenarios — flagging covenant breaches before they happen.
DSCR Calculator FAQ
What is DSCR in commercial real estate?
DSCR (Debt Service Coverage Ratio) measures whether a property's net operating income is sufficient to cover its mortgage payments. A DSCR of 1.25x means the property generates 25% more income than needed to pay its debt. It is the primary metric lenders use to evaluate loan risk — if DSCR falls below 1.0x, the property cannot cover its debt from operations alone.
What DSCR do lenders require?
Most commercial lenders require a minimum DSCR between 1.20x and 1.35x, depending on the property type and loan program. SBA 504 loans typically require 1.15–1.25x. Conventional commercial loans require 1.25–1.35x. CMBS loans may accept 1.20x. Higher-risk properties (value-add, transitional) may need 1.40x or higher. Always confirm with your specific lender — requirements vary by institution and market conditions.
How do I calculate DSCR?
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service. NOI is your property's income after operating expenses but before mortgage payments. Annual Debt Service is your total annual mortgage payment (principal + interest). For example, if NOI is $200,000 and annual debt service is $160,000, DSCR = 1.25x.
What is the difference between DSCR and LTV?
DSCR measures income coverage — can the property pay its debt from operations? LTV (Loan-to-Value) measures equity cushion — how much of the property's value is financed by debt? Lenders use both: DSCR ensures adequate cash flow, LTV ensures adequate collateral. A loan might pass LTV requirements (70%) but fail DSCR if the property has low NOI relative to the payment.
What happens if DSCR falls below 1.0x?
A DSCR below 1.0x means the property's NOI is insufficient to cover its debt payments — you must cover the shortfall from other sources (reserves, other properties, personal funds). Most loan covenants trigger penalties, increased reserves, or even default provisions when DSCR drops below agreed minimums. This is why pro forma DSCR analysis over the entire hold period is critical — not just at acquisition.
Should I use interest-only or amortizing payments for DSCR?
Use the actual debt service the lender will require. During an interest-only period, debt service is lower, so DSCR will be higher. When the loan converts to amortizing payments, debt service increases and DSCR drops. Always model DSCR for both periods — lenders will. Solsten's Financing page automatically calculates debt service across IO periods, amortization, and refinance scenarios.
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