Debt Service Coverage Ratio (DSCR)
Can this property pay its own mortgage?
Formula
DSCR = Monthly Rent / Monthly Mortgage Payment (P&I)
Compares gross rental income to the principal & interest payment. Lenders use this to determine loan eligibility.
What Is It?
DSCR tells you whether a property generates enough rental income to cover its mortgage. A DSCR of 1.0 means break-even; above 1.0 means the property "pays for itself."
Worked Example
A property rents for $3,000/mo with a $2,400/mo P&I payment.
| Monthly Rent | $3,000 |
| Monthly P&I | $2,400 |
$3,000 / $2,400 = 1.251.25 DSCR
Why It Matters
- ✓Lenders require DSCR >= 1.25 for investment property loans
- ✓DSCR loans don't require personal income verification (investor-friendly)
- ✓Quick litmus test: if DSCR < 1.0, the property loses money on day one
- ✓Higher DSCR = more cushion for vacancies or unexpected expenses
What's Good vs Bad?
Excellent
1.50+ (strong coverage)
Good
1.25–1.49
Poor
Below 1.0 (negative cashflow)
Limitations
- ⚠Only considers P&I — ignores taxes, insurance, and maintenance
- ⚠Doesn't measure profit, just debt coverage
- ⚠A 1.25 DSCR doesn't guarantee positive cashflow after all expenses
- ⚠Rent estimate accuracy directly impacts DSCR reliability
How Prop2Profit Uses This Metric
Prop2Profit shows DSCR on every listing's analysis sidebar. Properties below 1.0 are flagged. DSCR is calculated using estimated rent and mortgage based on default or custom assumptions.