How to use it
Enter the price, your down payment and the loan terms, then the rent and the running costs. The tool shows the DSCR the way most lenders work it out, and the numbers an investor watches.
The formulas
- DSCR (lender method) = monthly rent ÷ PITIA. PITIA is principal, interest, taxes, insurance and association (HOA) dues. Most DSCR loan lenders use this one.
- DSCR (NOI method) = net operating income ÷ principal and interest. Commercial lenders use this one.
- Net operating income (NOI) = rent − vacancy − taxes − insurance − HOA − repairs − management
- Cash flow = NOI − principal and interest
- Cash-on-cash return = yearly cash flow ÷ (down payment + closing costs)
- Cap rate = yearly NOI ÷ price
Example: a $400,000 rental with 25% down, a 7%, 30-year loan and $3,200 rent.
- Principal and interest: $1,995.91 a month on a $300,000 loan.
- PITIA: $1,995.91 + $400 tax + $150 insurance = $2,545.91.
- DSCR: $3,200 ÷ $2,545.91 = 1.26. Most DSCR lenders accept that.
- NOI after 5% vacancy and 16% for repairs and management: $1,978 a month.
- Cash flow: $1,978 − $1,995.91 = −$17.91 a month. The lender is happy, but the property barely breaks even. That gap is why the two DSCRs differ.
Common questions
What DSCR do I need for a DSCR loan?
Most lenders want at least 1.0, and give their best rates at 1.25 or higher. Some lend below 1.0 with a larger down payment, often 30% to 35%.
What is a DSCR loan?
A mortgage for investment property that qualifies you on the property's rent instead of your personal income. There are no tax returns or pay stubs. Rates are usually higher than a normal mortgage.
What is a good cash-on-cash return?
Many investors aim for 8% to 12%. A lower return can still make sense in an area where you expect prices and rents to rise.
What is a good cap rate?
It depends on the area. Big-city rentals often trade at 4% to 6%, and smaller markets at 7% to 10%. A higher cap rate usually means more risk or less growth.
Last checked: 2026-09-26