DSCR = NOI ÷ annual debt service. A DSCR of 1.25 means the property produces $1.25 of operating income for every $1.00 of loan payments due. It is the core test of whether a property can carry its own debt.

Reading the bands

  • Below 1.0: the property cannot cover its payments; someone must feed it cash.
  • 1.0–1.2: thin coverage; small vacancies break the budget.
  • 1.2–1.5: the common comfort zone for many investment and commercial lenders, though exact thresholds vary by lender, country and program.
  • Above 1.5: strong cushion for surprises.

Reverse-engineering loan size

Run it backwards: maximum supportable debt service = NOI ÷ required DSCR. A property with $54,000 NOI under a 1.25 requirement supports payments up to $43,200/year. That is how loan sizing conversations start.

Compute your ratio and coverage cushion in the DSCR calculator.