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DSCR Calculation Real Estate: How to Analyze Property Cash Flow and Secure Better Loans
Last Updated: June 25, 2025
What Is DSCR in Real Estate?
DSCR calculation real estate directly measures your property's ability to cover its debt obligations through income from rent. In real estate, DSCR calculation real estate uses net rental income as the input for evaluating property risk and profitability in loan scenarios.
Definition of DSCR calculation real estate
- DSCR, or Debt Service Coverage Ratio, compares your rental income to the total annual debt payment liability related to the property. When focusing on DSCR calculation for real estate, emphasize how lenders assess the ratio to determine if your property generates enough income to make regular payments without default risk.
Primary formula for DSCR calculation real estate
- Rent includes all collected lease payments.
- The industry standard for DSCR calculation real estate applies this formula:
- PITIA stands for Principal, Interest, Taxes, Insurance, Association Dues.
- Your DSCR calculation real estate process evaluates whether gross rental income covers the total annual PITIA. For example, if your annual rent totals $50,000 and annual PITIA equals $40,000, your DSCR would be 1.25.
DSCR = Rent / PITIA
