DSCR calculator
NOI divided by annual debt service. The division is the easy part, so this page also does the parts people get wrong: it solves the identity in any direction, turns a loan quote into the payment, and shows the covenant the way a lender reads it, as dollars of income the property could lose before the ratio breaks.
The cushion at the levels a loan document tests
A DSCR is a covenant as much as a ratio: the loan is sized at one level and then tested at another for the life of the loan. Each row shows the NOI at which coverage sits exactly at that level, and how much of today's income could disappear first.
| Coverage level | NOI at that level | Cushion | As a share of NOI |
|---|---|---|---|
| 1.00x, breakeven | $480,000 | $120,000 | 20.0% |
| 1.20x, a common ongoing covenant | $576,000 | $24,000 | 4.0% |
| 1.25x, a common sizing floor | $600,000 | $0 | 0.0% |
Annual convention throughout: NOI and debt service both measured over twelve months, principal plus interest. Whether reserves are deducted above the NOI line and whether the ratio is tested at the note rate or a stress rate are choices this page cannot make for you; the lender's term sheet makes them, and the honest comparison uses the lender's.
Coverage is one of the three tests a lender runs, and it cannot size the loan alone: the answer is the smallest of coverage, loan to value, and debt yield. A real underwriting builds the NOI from the rent roll and the T-12 first. Altyst reads the documents and does all of it.
One division, three rearrangements
The debt service coverage ratio is a property's annual net operating income divided by its annual debt service, principal plus interest for twelve months. Because it is one identity, knowing any two of the three figures gives you the third: the NOI a coverage level requires is the level times the debt service, and the payment an income can carry is the NOI divided by the level. Which rearrangement you need depends on the question. A borrower checks what a quoted loan covers at. A lender works backwards from the income to the payment it will allow. An asset manager watching a covenant wants the third form: the income floor under the test.
The thing to hold onto is that a DSCR is a cushion stated as a ratio. At 1.25x, exactly 20% of the income could disappear before the payment stops being covered, because one over 1.25 is 0.80. That translation, from a ratio into dollars of income the property can lose, is what the table under the calculator does, and it is the version of the number that survives an argument.
A worked example
Take the figures the calculator loads with: $600,000 of NOI against $480,000 of annual debt service, which is exactly a 1.25x DSCR. The cushion to breakeven is $120,000, which is 20% of the income. The cushion to a 1.20x covenant is much thinner: the ratio holds until NOI falls below $576,000, so only $24,000 of income, four percent, stands between this deal and a covenant conversation.
- Coverage converts income into payment, not into a loan. $600,000 of NOI at a 1.25x floor supports $480,000 of annual debt service. What that buys depends entirely on the quote: at 6.5% on thirty-year amortization the payment constant is about 7.58%, so the same $480,000 carries roughly $6.33 million of loan. At 6.0% it carries more, on twenty-five-year amortization it carries less, and the property never changed.
- The 65% LTV loan on this deal fails the coverage floor. A $6,500,000 loan at 6.5% over thirty years costs $493,013 a year, and $600,000 of NOI covers that at about 1.22x, below a 1.25x floor. This is the loan sizing lesson in one row: on these numbers the coverage test, not the value test, is what sizes the loan.
- The cushion is the honest headline. 1.25x and 1.22x sound interchangeable. $120,000 of headroom versus $107,000 of headroom against the same covenant is a statement a credit committee can weigh.
Going-in versus stressed, and the interest-only flattery
The DSCR on day one is rarely the DSCR that sized the loan. Lenders commonly test coverage at a stress rate above the contract coupon, on the amortizing payment even when the loan starts interest only, and on their own normalized NOI with reserves deducted. Every one of those choices pulls the sizing DSCR below the one the borrower experiences. Then the flattery runs the other way: during an interest-only period the actual payment is smaller, so the reported ratio is higher, and it steps down the month amortization begins. A loan can honestly show a comfortable coverage in year one and a covenant breach in year four on flat income. The ratio should be run for every year of the hold, against the downside case, and the number to report is the minimum, not the first.
What a DSCR cannot tell you
It cannot size the debt by itself. Coverage is one of three tests run in parallel: a loan-to-value cap against the appraisal, the coverage test against the income, and a debt yield floor that ignores both the rate and the appraisal. The lender funds the smallest answer, and which test binds flips with the rate environment, which is exactly the fact a single-ratio page cannot show. The loan sizing calculator runs the three tests together and names the binding one.
It also says nothing about the return. Coverage measures safety for the lender, not performance for the equity: a deal can cover at 1.40x and still produce a thin cash-on-cash, and vice versa. The levered return side of the same year is the cash-on-cash calculator, and how the metrics fit together is written out in cap rate versus cash on cash versus IRR.
Which NOI belongs in the numerator
The same discipline as every income ratio: name the NOI. Trailing, normalized, and pro forma NOI produce three different coverage ratios on the same loan, and the lender will use its own, typically with a vacancy factor applied, a management fee imputed, and replacement reserves deducted above the line. How that number gets built from the documents is its own subject; the method is written out in how to calculate NOI, and the glossary entry carries the formal definition, the formula, and the common mistake.
What this page does not do
It does not tell you what minimum a lender will quote you this quarter. Floors move with credit conditions, differ by asset class and leverage, and a static page asserting one would be stale the week it shipped; the levels named here are common conventions, and the one that governs your deal is on your term sheet. How those conventions vary, and why the cushion is the honest way to read any ratio, is written out in what is a good DSCR. And it is not advice: it is arithmetic on the numbers you typed, stated with the conventions it uses, and nothing more.
Questions
What is DSCR?
The debt service coverage ratio: a property's annual net operating income divided by its annual debt service, principal plus interest. A DSCR of 1.25x means the property produces $1.25 of income for every $1.00 the loan consumes, so income could fall 20% before the payment stops being covered. It is both a snapshot and a covenant: lenders size loans to a minimum DSCR and then test the ratio for the life of the loan.
What DSCR do lenders require?
It varies by asset class, leverage, and lender, and any single number a page quotes you is a convention rather than an offer. Agency multifamily lending commonly sizes around a 1.25x minimum. Bank and life company lending on commercial property often sits between 1.20x and 1.35x, and the floor moves higher for single-tenant, hospitality, and transitional assets, where the income is lumpier or less proven. The floor also flexes with the loan: higher leverage and longer interest-only periods usually buy a stricter test. The number that governs your deal is the one on your term sheet.
Is the DSCR calculated on interest-only payments?
Usually not for sizing. During an interest-only period the actual payment is smaller, so the DSCR the borrower experiences is higher, but most lenders size the loan against the amortizing payment, sometimes at a stressed rate, because that is the payment the property must carry for most of the term. The same loan can honestly show three different DSCRs: the sizing test, the interest-only year, and the year amortization begins. Say which one you are quoting.
Can I size a loan from a DSCR?
Not from the DSCR alone. Coverage converts an income into a supportable payment, and turning a payment into a loan amount requires the rate and the amortization, which is what the mortgage constant does. Even then, coverage is only one of three tests: lenders also cap the loan at a share of appraised value and at a minimum debt yield, and they fund the smallest of the three answers. The loan sizing calculator on this site runs all three and names the one that binds.
Which NOI goes in the numerator?
The lender's, if you want the answer that will survive credit committee. A lender typically applies its own vacancy factor, adds a management fee whether or not one was paid, and deducts replacement reserves above the line, all of which pull the underwritten NOI below the marketed one. A DSCR computed on the flyer's pro forma NOI and one computed on the lender's normalized NOI can differ by a tenth of a point or more on the same building and the same loan.
What happens if the DSCR falls below the covenant?
The loan document decides. Typical consequences run from a cash sweep, where excess cash flow is trapped until coverage recovers, to a reserve requirement or, at the severe end, an event of default. This is why the cushion matters more than the ratio: a 1.31x against a 1.20x covenant is nine hundredths of a point of headroom, which on this page you can see in dollars of NOI instead.
Can I put this calculator on my own website?
Yes, and it takes one line of HTML. There is no account and no key to request, so nothing can expire and break your page a year from now. The framed version loads no advertising script, ours or anyone else's, and sets no cookie on your readers. Keep the credit line under it and it is yours to use, including on a commercial site. The code is on the embed page.
Do you store what I type?
Not the figures. The math runs in your browser, nothing you type is sent to us, and there is no account or email field. Your scenario is written into the page address so you can bookmark it or send it to a partner, which does mean a link you share carries your figures with it. The page does carry the site's normal cookies, which the cookie notice lists; the embeddable version carries none.
Coverage is one row of the model
Altyst reads the offering memorandum, the rent roll, and the T-12, builds the NOI this page asks you to type, sizes the debt on all three lender tests, and reports coverage for every year of the hold.