Namaste Boston Homes
Namaste Boston Homes

DSCR Calculator

Calculate your Debt Service Coverage Ratio to evaluate investment property cash flow and lender requirements.

$

Total gross rental income per year

$

Property taxes, insurance, HOA, maintenance (excludes mortgage)

$

Total annual principal + interest payments

Net Operating Income (NOI)

$28,800

Annual rental income - operating expenses

Debt Service Coverage Ratio (DSCR)

1.20x

Marginal - Property breaks even or slight positive cash flow. Some lenders may approve.

Understanding DSCR

Debt Service Coverage Ratio (DSCR) measures a property's ability to cover its debt obligations with rental income. It's calculated as:

DSCR = Net Operating Income ÷ Annual Debt Service

Why Lenders Require DSCR

  • Risk Assessment: A DSCR above 1.0 means the property generates more income than debt payments
  • Cushion for Vacancies: Lenders want assurance you can cover payments even during vacancy periods
  • Market Fluctuations: Higher DSCR provides buffer against rental market downturns

Typical DSCR Thresholds

≥ 1.25

Preferred by most lenders. Shows strong cash flow.

1.0 - 1.25

Marginal. May require higher down payment or reserves.

< 1.0

Risky. Property loses money. Unlikely to be approved.

Improving Your DSCR

  • Increase Rent: Market-rate adjustments can significantly improve NOI
  • Reduce Expenses: Shop for better insurance, challenge property tax assessments
  • Larger Down Payment: Lower mortgage = lower debt service
  • Longer Loan Term: 30-year vs 20-year reduces monthly payments (but increases total interest)

Boston Area Investment Context

In Greater Boston's high-value market, achieving 1.25+ DSCR can be challenging due to elevated property prices. Many investors:

  • Target multi-family properties (2-4 units) for higher rental income
  • Focus on high-demand rental areas (Cambridge, Somerville, Brookline)
  • Factor in appreciation potential beyond cash flow
  • Use DSCR loans (specialized investor loans that focus on property cash flow, not personal income)

Financial Disclaimer: This calculator provides educational estimates only. Actual DSCR requirements vary by lender, property type, loan program, and market conditions. Consult a qualified mortgage professional or investment advisor for personalized guidance. Namaste Boston Homes is not a lender or financial advisor.

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