Commercial Loan DSCR Calculator

What DSCR measures

Debt Service Coverage Ratio divides annual net operating income (NOI) by annual debt service (principal plus interest payments on the loan). A DSCR of 1.25 means the property generates 125% of what it needs to service the loan — leaving a 25% cushion for vacancy, repairs, and softening rents. Commercial real estate lenders use DSCR as a primary underwriting metric because it answers a single direct question: does this property produce enough income to pay its loan from operations alone. A DSCR below 1.0 means the property does not.

How lender thresholds vary by property type

Industry references such as the Urban Land Institute publish typical DSCR ranges by property type, and the figures below reflect the bands most often cited in commercial underwriting handbooks. Multifamily residential is commonly cited at around 1.20-1.25 minimum. Office and retail tend to sit higher at 1.25-1.35 given elevated tenant risk. Industrial and warehouse typically appear in the 1.20-1.30 range. Hospitality is usually 1.35-1.50 because hotel income is more volatile. Special-purpose property — restaurants, car washes, single-tenant retail — is commonly cited at 1.40 or higher because the income depends heavily on a single operator. The figures shift with market conditions; tight lending periods push minimums up, looser periods can allow lower coverage.

How NOI is constructed

NOI is gross rental income minus operating expenses. Operating expenses include property tax, insurance, maintenance, management fees, utilities not billed to tenants, a vacancy allowance, and a reserve for routine capital expenditure. They do not include mortgage principal, mortgage interest, depreciation, or income tax — those sit outside the operating definition. Seller-supplied NOI figures sometimes exclude line items that should be included, so the most reliable basis for the calculator's NOI input is the actual operating statement reviewed independently rather than the figure the seller presents.

Global vs property-level DSCR

Global DSCR aggregates all of an owner's properties — useful when the owner has multiple properties and consolidated finances. Property-level DSCR isolates one property — the standard metric for new acquisition underwriting. Lenders typically run both and apply different weights depending on the deal structure. The calculator uses property-level math; for a global view, sum NOIs and debt services across all properties before entering them.

Worked example

An office building generating 480,000 annual NOI with 380,000 of annual debt service produces a DSCR of 1.26x — at the floor of the range commonly cited for office property. Excess annual cash flow comes out to 100,000, the buffer available for vacancy, maintenance, or capital improvements before coverage breaks. The same property at 350,000 of debt service produces a DSCR of 1.37x — a more comfortable position, typically associated with better loan terms. At 450,000 of debt service, the DSCR drops to 1.07x — technical break-even but well below the typical underwriting threshold for office, where lenders typically require compensating factors before approving a loan at that coverage.

Stress-testing the DSCR

Real commercial underwriting rarely accepts the base-case DSCR as the only relevant figure. The same calculator can be re-run with reduced NOI inputs — for example, NOI minus a 10% or 15% vacancy stress — to see how coverage behaves under more conservative assumptions. A 1.25 base case that drops to 0.95 under a 15% NOI stress is materially riskier than a 1.35 base case that holds above 1.10 under the same stress. The result panel's NOI cushion figure shows directly how far NOI can fall before the property crosses below the 1.0x line.

How DSCR relates to personal debt-to-income

DSCR and personal DTI describe the same underlying coverage relationship from inverse angles. DTI is the share of income going to debt service; DSCR is income divided by debt service. A 40% DTI is roughly equivalent to a 2.5x DSCR — 40% of income servicing debt is the same as income covering debt 2.5 times over. Commercial lending uses DSCR because the multiple framing makes the cushion magnitude visible directly. Personal lending uses DTI because it computes more easily from a paycheque.