DSCR Loan Calculator

An investor buys a $400,000 single-family rental with 25% down, financing $300,000.00 on a 30-year loan at 7.5%. It rents for $3,200 a month. They budget 5% vacancy, $4,800 of property tax, $1,800 of insurance, 5% of rent each for CapEx and repairs, and 8% of collected rent for a property manager.

NOI of $23,121.60 against $25,171.68 of debt service gives a DSCR of 0.92x: the property loses money after the mortgage. Yet the rent-to-PITIA ratio is $3,200.00 ÷ $2,647.64 = 1.21x, which many DSCR loan programs would approve. Both numbers are correct; they answer different questions. The lender's ratio asks whether the rent covers the bill today. The NOI ratio asks whether the investment still works after empty months, repairs and replacements.

Three other measures round out the picture. The cap rate is NOI ÷ price = 5.78%, below the 7.5% loan rate, which is why leverage hurts here. The Debt Yield, NOI ÷ loan amount, is 7.71%. And the Gross Rent Multiplier (GRM), price ÷ annual rent, is 10.42.

To reach 1.25x on NOI, the property would need $4,098.26 a month in rent, or a loan no larger than $220,453.09 (55.1% of the price), meaning about $179,546.91 down.

A property rented by the night has no monthly rent to enter, so the calculator's short-term rental mode builds one from three assumptions of yours: the average nightly rate, the share of the year's 365 nights you expect to be booked, and the costs a long-term lease doesn't have, such as cleaning, platform fees, supplies and utilities, as a share of booking revenue. Occupancy takes the place of the vacancy rate. The net revenue divided by 12 becomes the monthly rent, and taxes, insurance, reserves and management come off it as usual.

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Short-term rental costs, as a share of booking revenue

Rented at $250.00 a night and booked 65% of the year, the example property earns $59,312.50 over 237.25 nights. With 20% of that going to short-term rental costs, the net is $47,450.00, or $3,954.17 a month, against $3,200.00 on a lease. The DSCR on NOI is 1.28x, against 0.92x as a long-term rental. At 50% occupancy it drops to 0.93x, which is why the occupancy assumption deserves a stress test of its own.

Every number in this mode is an assumption, and lenders form their own view of short-term income. Treat the long-term rent as the floor: if the property only covers its debt at a high occupancy, the deal depends on a booking calendar you can't underwrite in advance.

In commercial underwriting, DSCR is one of three tests applied together. Loan-to-value limits the loan against the property's worth. DSCR limits it against the property's income at the proposed rate and amortization. Debt yield limits it against income alone, so a lender is protected even if rates or loan terms change. Commercial lenders commonly look for a DSCR somewhere around 1.20x to 1.35x depending on the property type and market, and residential DSCR loan programs often set their minimum between 1.00x and 1.25x, sometimes allowing lower ratios with a larger down payment or a higher rate. Lenders also use their own rent estimate, usually from an appraiser's rent schedule, rather than your projection.

Here is what each lever does to the NOI-based DSCR of the example property:

Interest-only payments raise the ratio without improving the property; the principal still has to be repaid or refinanced later. Rent and expense changes are the only levers that improve the investment itself, and they also raise the price a buyer would pay you, since commercial buyers value property on NOI.

Using GRM and debt yield to screen deals

Before running a full pro forma, investors often sort listings by Gross Rent Multiplier: a lower GRM means more rent per dollar of price. It is quick but blind to expenses, so two properties with the same GRM can produce very different NOI. Debt yield is the lender-side screen: because it ignores the interest rate and amortization, it shows how much income stands behind each dollar borrowed, whatever the loan terms.

If a property only works on an interest-only loan or a rent you haven't confirmed, keep negotiating the price. And if you are buying to renovate rather than rent right away, the hard money loan calculator covers short-term financing before you refinance into a DSCR loan.

A DSCR loan is underwritten on the property rather than your paycheck: the lender compares the rent, or the net operating income, with the mortgage payment and usually wants about 1.25x or more. In the example, the rental covers its debt 0.92x on an NOI basis, and reaching 1.25x would cap the loan at $220,453.09, 55.1% of the price.

Run both the NOI-based ratio and the rent-to-PITIA ratio in the DSCR loan calculator before you apply, since programs differ on which they use, and stress-test the rent and vacancy rather than the best case.