How is the DSCR ratio calculated?

The calculation compares the property's gross monthly rent to its full monthly housing expense, meaning principal, interest, property taxes, insurance, and association dues where they apply. Divide the rent by that expense and you have the coverage ratio. When rent and expense match, the ratio sits at break-even; when rent comes in higher, the property shows a cushion, which underwriters generally like to see. Lenders typically set the rent figure from your current lease or from an appraiser's market rent analysis, whichever the program calls for. Short-term rental history and vacancy assumptions may adjust the figure, depending on the program. The quickest way to see where a property lands is to run the numbers through our DSCR calculator.