DSCR Calculator
This free calculator computes the debt service coverage ratio (DSCR) from net operating income and total debt service, checks it against a lender minimum, and shows the maximum debt service the income supports. Enter annual net operating income, annual debt service, and the required minimum DSCR.
How the DSCR is calculated
The debt service coverage ratio divides net operating income by total debt service. A DSCR above 1.0 means income more than covers the debt payments; exactly 1.0 means no margin; below 1.0 means income falls short. A DSCR of 1.25 leaves a 25 percent cushion over the debt payments.
What is a good DSCR
It depends on the asset and lender, but many commercial real estate lenders look for a minimum DSCR around 1.20 to 1.25 at origination, with stabilized assets sometimes lower and riskier or transitional deals higher. Lenders use the minimum both to size a loan and as an ongoing covenant.
How much debt service the income supports
Divide net operating income by the required minimum DSCR to get the maximum annual debt service the property supports. With 500,000 dollars of net operating income and a 1.25 minimum, the property supports up to 400,000 dollars of debt service. The calculator also shows the headroom against current debt service.
For lenders
DSCR is only as reliable as the data behind it. Zolvo helps lenders track financial and collateral covenants like DSCR against live data through covenant compliance monitoring and alert before a breach, including for commercial real estate lending.
Frequently asked questions
What is a debt service coverage ratio?
DSCR measures how well a property or business covers its debt payments out of operating income, calculated as net operating income divided by total debt service. A DSCR of 1.25 means 1.25 dollars of income for every 1 dollar of debt payment.
What is a good DSCR?
Many commercial real estate lenders look for a minimum around 1.20 to 1.25 at origination, with stabilized assets sometimes accepted lower and riskier deals requiring more. Below 1.0 means income does not fully cover debt service.
How much debt service can my income support?
Divide net operating income by the lender minimum DSCR. With 500,000 dollars of NOI and a 1.25 minimum, the property supports up to 400,000 dollars of annual debt service.
How do lenders monitor DSCR after closing?
DSCR is a common financial covenant, usually tested quarterly or annually. Falling below the minimum is a breach that can trigger cash sweeps, repricing, or default remedies, so lenders track the trend.