What is DSCR?
The Debt Service Coverage Ratio (DSCR) measures whether a rental property earns enough to cover its mortgage. It's the first number lenders look at when underwriting an investment property loan — and the number every landlord should track monthly.
A DSCR of 1.00× means the property exactly breaks even against its mortgage. Above 1.00× the property pays for itself; below 1.00× you're feeding it out of pocket.
What DSCR do lenders require?
| DSCR | What it means |
|---|---|
| ≥ 1.25× | Comfortable — most DSCR-loan programs approve here with best pricing |
| 1.20 – 1.25× | Typical minimum for conventional investment property loans |
| 1.00 – 1.20× | Approvable with some lenders, higher rates or more reserves required |
| < 1.00× | Negative coverage — expect a bigger down payment or a no-ratio program |
How to calculate NOI correctly
Net Operating Income = all rental income (minus a vacancy allowance) minus operating expenses: property taxes, insurance, HOA dues, repairs & maintenance, utilities you pay, and management fees. NOI excludes the mortgage — debt service is applied after, which is exactly what the ratio compares.
Three ways to improve your DSCR
1. Raise effective income — rent increases at renewal, pet rent, or converting to mid/short-term rental where it nets more. 2. Cut controllable expenses — shop insurance yearly, protest property-tax assessments, self-manage. 3. Restructure debt — a rate-and-term refinance or longer amortization lowers the monthly payment and lifts the ratio immediately.