Debt Service Coverage Ratio (DSCR) Calculator
The Debt Service Coverage Ratio (DSCR) evaluates a company’s or real estate property’s ability to cover total debt service obligations—including both interest expenses and principal repayments—from its Net Operating Income (NOI).
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Debt Service Coverage Ratio (DSCR).
| Sensitivity Case | Assumption Shift | Driver Value | Debt Service Coverage Ratio (DSCR) | Impact vs Base |
|---|
Formula & Methodology
DSCR = Net Operating Income (NOI) / Total Debt Service (Principal + Interest)NOIGross revenue minus all operating expenses (before debt service and taxes).
Total Debt ServiceSum of annual principal payments and interest expenses.
Practical Worked Example
Oakridge Commercial Plaza generates $375,000 in annual Net Operating Income (NOI) against $250,000 in annual mortgage payments ($150,000 interest + $100,000 principal).
Interpretation & Industry Benchmarks
DSCR is the single most critical metric used by commercial real estate lenders, SBA loan underwriters, and bank credit committees.
Cannot service debt from operations.
Passes break-even, but vulnerable to vacancy spikes.
Standard commercial loan underwriting approval range (typically 1.25x minimum).
Preferred tier for premium interest rates.
Industry Nuance: Multifamily apartment lenders often require 1.20x–1.25x DSCR, while hospitality/hotel and restaurant loans require 1.40x–1.50x+ due to revenue volatility.
Analytical Limitations
- Does not include future capital replacement reserve expenses unless explicitly deducted from NOI.
Frequently Asked Questions
What DSCR do banks require for a commercial mortgage?
Most commercial banks and SBA lenders mandate a minimum DSCR of 1.20x to 1.25x, meaning NOI must exceed annual debt payments by at least 20% to 25%.