Debt Service Coverage Ratio (DSCR)
Can this property pay its own mortgage?
Formula
DSCR = Monthly Rent / PITIA
PITIA = Principal + Interest + Taxes, Insurance, and Association (HOA) dues. DSCR lenders qualify investor loans on gross rent divided by the full housing payment — not P&I alone.
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 total PITIA payment.
| Monthly Rent | $3,000 |
| P&I | $1,950 |
| Taxes + Insurance + HOA | $450 |
| Total PITIA | $2,400 |
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
- ⚠Ignores operating costs — vacancy, maintenance, management, capex
- ⚠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, computed as estimated rent divided by PITIA (P&I + taxes + insurance + HOA) under default or custom assumptions. Properties below the 1.25 lender threshold are flagged.