How to Calculate DSCR for a Rental Property (With 3 Worked Examples)

DSCR — Debt Service Coverage Ratio — answers one question: does this property produce enough rent to cover its own mortgage? Everything else a conventional lender looks at (your tax returns, your W-2, your other debts) is ignored.

The standard minimum DSCR for a rental loan is 1.20. That means rent is 20% higher than the full mortgage payment. A 1.0 DSCR means the property exactly covers itself with no margin. Below 1.0, the property is losing money on paper — and most lenders decline.

Why this matters: conventional Fannie Mae and Freddie Mac loans calculate your personal debt-to-income ratio (DTI) and add every rental mortgage you carry to your personal debt load. DSCR loans don't. You can have 10 other rentals, $200K in student debt, and file Schedule E with aggressive write-offs — if this property hits 1.2 DSCR, you may qualify. That's why real estate investors at scale use DSCR.

The numerator has three sourcing paths. Pick the one that matches your property's state.

Does not count: laundry income, parking, storage, projected rent increases, ADU income if the ADU isn't legal, and income from any other property you own. Only the subject property's rent.

This is where most online DSCR calculators lie to you. They run rent divided by principal + interest only and give you a DSCR that's 20–40% higher than what a real lender will calculate. Your actual DSCR uses full PITIA at the note rate.

Here's what's in PITIA:

• P + I: Principal and interest at the full note rate on 30-year amortization. Not interest-only. Not the teaser rate. If you're quoted 7.75%, we use the P&I payment at 7.75% over 360 months.
• T — Taxes: Annual property tax divided by 12. Use the appraised-value-adjusted tax bill if you're buying, not the seller's current bill at a lower assessed value. Florida, California, and Texas all reassess at sale.
• I — Insurance: Annual hazard insurance premium divided by 12. Use a real quote, not a guess. Florida hurricane, California wildfire, and Texas freeze-risk zones have seen premiums double in the last 3 years.
• A — Association dues: Monthly HOA, condo, or co-op fees. Special assessments do not count monthly, but a known assessment coming in the next 12 months may affect underwriting.

Missing property tax or insurance from the denominator is the #1 reason borrowers think they're approved and come back with a decline. Our DSCR calculator uses full PITIA so your result matches what underwriting will actually compute.

Single-family rental in Fort Worth, Texas. Purchase price $340,000, 25% down, $255,000 loan.

Wait — that's only 1.07, not 1.25. Which means on this deal the property does not pass at the standard 1.20 threshold. At 680–719 FICO, this gets declined. With 740+ FICO and 30% down, the same borrower might get approved at 1.0+ exception pricing.

To hit 1.25 DSCR on this property, the borrower would either need rent of $3,100/mo (unlikely — above market) or a smaller loan — maybe $215,000 at 40% down, which drops PITIA to about $2,110 and lifts DSCR to 1.26.

This is the conversation real lenders have: the property sets a ceiling on loan size. If your DSCR isn't working, your down payment is the lever that fixes it.

3-bedroom vacation rental in Orlando, Florida. Same purchase price ($340,000, 25% down) but different income source.

Same purchase price, same loan amount, same down payment as the Texas example. The STR income swings DSCR from 1.07 to 1.69. This is why Florida, Tennessee, and Arizona vacation rentals are oversubscribed with DSCR investors — the math works even at elevated insurance costs. STR DSCR commonly lands 1.6–2.2 in strong tourism markets.

Important caveat: local STR regulation. Orlando and Panama City are STR-friendly; other Florida cities (Naples, Key West) have strict short-term rental restrictions. We verify legal rentability before using STR income.

2-unit duplex in Portland, Oregon. Purchase price $480,000, 20% down, $384,000 loan. Both units rented.

The appraiser's Form 1007 shows market rent of $2,150 per unit — total $4,300/mo. But the existing leases are under Oregon's SB 608 rent cap (7% + CPI, ~10% in 2026) and were set when rents were lower. We're stuck using $3,750 because those tenants are in place under legal capped rent.

DSCR = $3,750 ÷ $3,633 = 1.03

At 1.03 DSCR, this deal sits below the 1.20 standard threshold. Some lenders allow 1.0+ with 740+ FICO and 30% down, but if this borrower is 700 FICO and 20% down, it's a decline.

This is the rent-control problem: a property that would be easy to finance at market rent becomes difficult to finance at capped rent. Oregon, California, New Jersey, New York, Minnesota (St. Paul), and Washington DC all have this dynamic. The fix usually involves more down payment to drop the loan amount and lift DSCR back above 1.20.

Once you've run the math and your DSCR isn't where you need it, there are exactly three levers.

• 1. More down payment. Drops the loan amount, drops PITIA, lifts DSCR. The most common fix. Moving from 20% down to 30% down typically lifts DSCR by 10–15%.
• 2. Higher rent. Only works if market rent supports it. Raising lease rent above market means the lease won't hold at renewal. For vacant properties, the appraiser's 1007 is fixed — you can't negotiate it.
• 3. Lower-rate loan product. ARMs are 0.375–0.625% below 30-yr fixed. A 7/6 ARM at 7.125% has a lower PITIA than a 30-yr fixed at 7.75% for the same loan amount. Interest-only programs lower DSCR-relevant payment for 5–10 years but reset later.

What you can't control: tax bills, insurance premiums, HOA fees, and — on rent-controlled properties — current legal rent. This is why pre-qualification math matters. Run the full PITIA scenario before you write an offer.

• Using interest-only payment as PITIA. Only valid if your loan is IO. Otherwise inflates DSCR 20–30%.
• Using the seller's property tax bill. Taxes reset at sale in most states. Use the rate × new appraised value.
• Forgetting HOA. Condos and HOA-managed properties include this in PITIA. Easy to miss.
• Using projected rent after rehab. DSCR uses current market rent, not ARV-rent. If you're BRRRR'ing, run the refi DSCR on post-rehab market rent — but for the purchase DSCR, use pre-rehab or a conservative "as-is" appraiser rent.
• Averaging in non-rent income. Laundry, parking, pet fees, storage — none of it counts.
• Using your other rentals' income to "boost" this property. DSCR is property-level. Your portfolio income doesn't cross-subsidize.

Before you write an offer or commit to a refi, run the exact PITIA math on the property with real tax and insurance quotes, not estimates. Our DSCR calculator uses the same inputs underwriting will use.

For state-specific market notes — including rent-control jurisdictions, tax-assessed valuation quirks, and which markets support strong STR DSCR — see our state pages: Texas, Florida, California, Oregon, or the full DSCR program guide with all 51 state pages.