How to Use a DSCR Deal Calculator

DSCR analysis doesn't require a PhD in finance. It requires five numbers and one division. But getting those numbers right — and understanding what they mean — is the difference between a profitable deal and a money pit.

The Basic DSCR Formula

DSCR = Monthly Rental Income ÷ Monthly PITIA

That's it. One number divided by another. The complexity is in getting accurate inputs.

Step 1: Determine Monthly Rental Income

For Long-Term Rentals

Use the most conservative reliable estimate:

1. Rentometer: Enter the address, get median rent for comparable properties
2. Zillow Rent Zestimate: Quick estimate, verify with other sources
3. Property manager estimate: Call 2 PMs in the market and ask
4. Active listings: What are similar properties listed for RIGHT NOW?
5. Take the lower of your estimates — conservative is better than optimistic

Example: 3BR/2BA SFR in Indianapolis

• Rentometer: $1,600
• Zillow Zestimate: $1,650
• PM #1: $1,575
• PM #2: $1,600
• Use: $1,575 (most conservative)

For STR/MTR

Use AirDNA, Mashvisor, or actual booking data:

• Average nightly rate × occupancy rate × 30 days = monthly income
• Subtract platform fees (Airbnb: 3%, VRBO: 5–8%)
• Use conservative occupancy (60–70% for STR, 80–85% for MTR)

Step 2: Calculate Monthly PITIA

P (Principal) + I (Interest)

Use any mortgage calculator:

• Loan amount: Purchase price × (1 – down payment %)
• Interest rate: Your quoted DSCR rate
• Term: 30 years (or 15, if applicable)

Example: $225,000 property, 25% down, 7.25% rate

• Loan: $168,750
• Monthly P&I: $1,151

T (Taxes)

• Check the county assessor website for current annual taxes
• Critical: Adjust for post-sale reassessment if applicable
• Divide annual by 12

Example: $2,400/year ÷ 12 = $200/month

I (Insurance)

• Get an actual quote from an insurance agent
• Don't estimate — actual quotes can differ by 50% from assumptions
• Include flood insurance if in a flood zone

Example: $1,440/year ÷ 12 = $120/month

A (Association Dues)

• HOA monthly fee (check listing or HOA management company)
• If no HOA: $0

Example: $0 (no HOA)

Total PITIA

$1,151 + $200 + $120 + $0 = $1,471/month

Step 3: Calculate DSCR

DSCR = $1,575 ÷ $1,471 = 1.07

What This Means

Our example: 1.07 — tight but approvable at most lenders (minimum 1.0). However, cash flow after operating expenses will be thin.

Step 4: Full Cash Flow Analysis

DSCR only measures rent vs. PITIA. Your real cash flow includes operating expenses:

Despite a 1.07 DSCR (property covers its mortgage), the full picture shows negative cash flow. This property might not be a good deal unless you have a value-add plan to increase rent.

Common Calculator Mistakes

Mistake 1: Using Gross Rent for STR

STR income must be reduced by:

• Platform fees (3–8%)
• Cleaning costs ($100–$200 per turnover)
• Supplies and consumables ($50–$100/month)
• Occupancy rate (use 65%, not 100%)

Mistake 2: Ignoring Tax Reassessment

Your DSCR calculator shows current taxes. After purchase, taxes may increase 20–50%. Run the calculation with projected post-sale taxes.

Mistake 3: Estimating Insurance

"Insurance is probably $100/month" → Actual quote: $250/month. In Florida or disaster-prone areas, this error alone can flip a deal from positive to negative DSCR.

Mistake 4: Forgetting HOA Special Assessments

The $200/month HOA doesn't include the upcoming $15,000 special assessment. Check HOA financials before calculating.

Mistake 5: Using Ask Price, Not Offer Price

Calculate DSCR at your expected purchase price (after negotiation), not the listing price. A $10K reduction improves your DSCR.

Free DSCR Calculators

Frequently Asked Questions

Do DSCR lenders use my calculator results?

No — they use the appraiser's 1007 rent schedule for the income side. Your calculator helps you evaluate the deal before applying. The appraiser may estimate higher or lower rent than your analysis.

Should I include rental income from existing tenants or market rent?

Use market rent for your analysis. If existing tenants pay below market, that's upside potential. If they pay above market, your DSCR may be inflated.

How do I calculate DSCR for a multi-unit property?

Add all units' rent together for total monthly income. PITIA is still calculated on the single mortgage covering all units.

What DSCR should I target?

1.25+ for comfortable cash flow with operating expense buffer. 1.10–1.25 works but is tight. Below 1.10, you need a specific plan (rent increase, STR conversion, value-add).

The Bottom Line

DSCR calculation is simple math with critical inputs. Get the inputs right (verified rent, actual taxes, quoted insurance, real DSCR rate), and the calculation tells you everything. Get the inputs wrong, and you'll buy a deal that looks good on paper and bleeds money in practice.

Run every potential deal through a calculator before making an offer. And run it twice — once with your optimistic numbers and once with conservative numbers. If the deal works with conservative inputs, buy it.

Calculate your next deal at HonestCasa.