What Is a Good DSCR for a Rental Property?
The one number your lender checks before anything else — and the clearest measure of a deal's safety margin.
What DSCR means
DSCR — debt service coverage ratio — is NOI ÷ annual debt service: the property's net operating income divided by everything you pay the lender in a year. A DSCR of 1.25 means the property earns 25% more than the mortgage costs. A DSCR of 0.95 means the rent doesn't cover the loan and you're feeding the deal from your own pocket every month.
Two details trip people up. NOI is income after vacancy and operating expenses but beforethe mortgage — the loan payment must never be inside your expense line, or you'll double-count it. And debt service means the full payment (principal + interest), not interest alone.
What counts as “good”
• Below 1.00— the property loses money on paper. Some investors accept this betting on appreciation, but it's a bet, not income.
• 1.00–1.20— technically covered, but one vacancy or a roof repair wipes the margin. Most DSCR lenders won't go here, or will price it punitively.
• 1.20–1.25 — the classic lender minimum. Deals here get financed but have modest cushion.
• 1.25–1.50 — comfortable. This is the range most buy-and-hold investors should target.
• Above 1.50 — strong safety margin; the deal survives bad surprises.
How to improve a weak DSCR
DSCR has only two levers: raise NOI or lower the payment. In practice that means a larger down payment (smaller loan), a longer amortization, a lower rate, genuinely higher market rent, or cutting real operating costs. Be honest about which of those are in your control — "I'll self-manage forever" is how optimistic pro formas are born. The free calculator recomputes DSCR live as you flex the down payment and rate, so you can see exactly what it takes to reach 1.25.
Why it matters beyond the bank
Even if you're paying cash-adjacent rates or your lender doesn't require it, DSCR is the cleanest single expression of margin for error. It's one of the six weighted factors in the DealQuanta Score precisely because deals with thin coverage fail in boring, predictable ways: a tenant turns over, a furnace dies, and the "cash-flowing" deal spends a year underwater.