How to Calculate DSCR on a Rental Property (With an Example)
Calculating DSCR takes about a minute once you have the numbers. The result tells you whether a rental's income can support its mortgage payment.
The formula
DSCR = monthly rent ÷ monthly PITIA
PITIA stands for principal, interest, taxes, insurance and association dues. Use the full payment, not just principal and interest.
A worked example
| Monthly rent | $2,200 |
| Principal & interest | $1,910 |
| Property tax ($3,600 per year) | $300 |
| Insurance ($1,800 per year) | $150 |
| HOA | $0 |
| Total PITIA | $2,360 |
| DSCR | 0.93x |
At 0.93x the rent covers about 93 percent of the payment. Some lenders would decline this deal, while programs with a lower floor can approve it with reserves or a larger down payment.
How to improve a low DSCR
- Put more money down to reduce the loan amount and payment
- Choose a higher-yield property or submarket
- Document higher market rent, or use short-term-rental income where it is permitted
- Shop insurance, since premiums can swing the ratio
Use real numbers
Taxes and insurance vary widely, especially after a sale resets the tax assessment. Use realistic figures for the property, not the seller's old bill.
Want to test your own property? Use our free DSCR calculator.
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This article is general information, not financial, legal or tax advice. Loan terms vary by borrower, property and program.