Because knowing your DSCR is 1.15x doesn’t mean much if you don’t know what to do with that information.
We built our DSCR calculator because investors kept asking the same question: “Does this deal work?”
It’s a simple question with a not-so-simple answer. “Work” depends on your goals, your financing terms, your risk tolerance, and about a dozen other variables. But at the heart of every rental property investment is one fundamental calculation: does the income cover the debt?
That’s what the Debt Service Coverage Ratio tells you. And that’s what our calculator helps you figure out before you make an offer, before you sign a contract, before you wire earnest money to a title company. This guide will show you how to use it effectively, and more importantly, what to do with the results.
First: What Is DSCR, Really?
Let’s make sure we’re on the same page before diving into the calculator. Our Knowledge Base has a complete explanation of DSCR loans, but here’s the short version:
DSCR = Net Operating Income ÷ Total Debt Service
In plain English: take the rent and divide it by operating expenses (taxes, insurance, HOA, property management) and mortgage payment. The way lenders calculate this determines whether your deal gets approved—and at what terms.
A DSCR of 1.0x means the property breaks even—rent exactly covers the payment.
A DSCR of 1.25x means there’s a 25% buffer—good for cash flow and loan approval.
A DSCR of 0.85x means you’re feeding the property each month—potentially fine for appreciation plays, but you’ll need specific loan products and strong reserves.
Lenders use DSCR to assess risk. Investors use DSCR to assess viability. Our calculator helps you do both.
How to Use the AHL DSCR Calculator
Here’s how to get the most out of the calculator:
Step 1: Enter the Property Details
Property Value / Purchase Price: What you’re paying (or what the property is worth if refinancing).
Loan Amount: How much you want to borrow. If you’re putting 25% down on a $400,000 property, your loan amount is $300,000. The relationship between your loan amount and property value is your loan-to-value ratio—a key factor in your rate and approval.
Interest Rate: The rate you expect to get. If you’re not sure, use current market rates as a starting point. For estimation purposes, try running scenarios at different rates to see how sensitive your DSCR is.
Loan Term: AHL offers 30-year fixed and 40-year fixed with 10-year interest-only options. The calculator lets you toggle between amortizing and interest-only to see how each affects your payment and DSCR.
Step 2: Enter the Income
Monthly Rent: What the property will generate in rental income. If you have a lease in place, use the actual rent. If you’re estimating, be realistic—use comparable rentals in the area, not wishful thinking.
For short-term rentals (Airbnb/VRBO), you’ll need to annualize your projected revenue and convert to a monthly figure. AHL uses 75% of projected STR income for purchases documented by Form 1007, or 100% of actual income with 12 months of platform deposits. Our guide to DSCR loans for Airbnb properties has the full breakdown.
Step 3: Enter the Expenses
Property Taxes: Annual amount divided by 12. You can usually find this on the county assessor’s website or the property listing.
Insurance: Get a quote before you’re under contract if possible. AHL requires rent loss coverage equal to 6 months qualifying rent and liability coverage of at least $100,000. Rental property insurance is typically higher than homeowner’s insurance, and rates have increased significantly in some markets.
HOA Dues: If applicable. Don’t forget to check whether the HOA allows rentals; some have restrictions that would make the property ineligible.
Property Management: Even if you plan to self-manage, consider including 5-10% for property management. It makes your analysis more conservative, and if you ever decide to hire a manager, you’ll already know the deal still works.
Step 4: Review Your Results
The calculator will show you:
- Your DSCR ratio
- Monthly principal and interest payment
- Total monthly debt service (PITIA)
- Net operating income
- Estimated cash flow
Interpreting Your DSCR: What the Numbers Mean for Your Loan
Now for the part that matters: what do you do with this information? Here’s how DSCR translates to AHL loan eligibility based on our program requirements:
DSCR Above 1.25x — Strong Position
You’re in great shape for financing. This is the sweet spot where you’ll qualify for the best rates and terms, have comfortable cash flow, and maintain a buffer for unexpected expenses.
At AHL: You’ll qualify for both Invest Star and Invest Star Plus programs. With 760+ FICO, you can access up to 85% LTV on purchases under $1M. Reserve requirements are lower (3 months PITIA with 720+ FICO and ≤80% LTV).
What to do: Move forward confidently. You have room to absorb vacancies, repairs, and rate increases without the property becoming a burden.
DSCR Between 1.0x and 1.25x — Workable
This range is perfectly acceptable for DSCR financing. The property covers its debt service, but the margin is thinner.
At AHL: You’ll qualify for Invest Star. Invest Star Plus requires 1.1x minimum for 720+ FICO or 1.2x for 700-719 FICO—so you may not qualify for that program at these levels. LTV maxes vary by FICO tier (up to 85% for 760+ at 1.0+ DSCR).
What to do: Evaluate the upside. Is there rent growth potential? Can you add value through improvements? Is the appreciation story compelling? Properties in this range often make sense for value-add investors or in high-growth rental markets.
DSCR Between 0.75x and 1.0x — Needs Justification
The property doesn’t fully cover its debt service, which means you’ll be subsidizing it each month. This isn’t automatically a deal-breaker, but it requires a clear thesis.
At AHL: You’ll need Invest Star (Invest Star Plus doesn’t go below 1.1x). First-time investors aren’t eligible—you must have owned investment property for 12 months in the past 3 years. Reserve requirement jumps to 12 months PITIA. Max LTV drops to 75% for 760+ FICO. You’ll also need perfect mortgage history (0x30x12).
What to do: Ask yourself why you’re willing to accept negative cash flow. Appreciation potential? Below-market rent that you can increase? Future development value? If you have a compelling answer and the reserves to support the shortfall, we have products for exactly this situation.
DSCR Below 0.75x — Proceed with Caution
At this level, the property requires significant monthly subsidization. Financing becomes more difficult and more expensive. Understanding why DSCR loans get declined helps you assess whether your deal can get done.
At AHL: Still possible on Invest Star, but with tighter restrictions. LTV maxes at 75% for 760+ FICO, drops further for lower scores. Loan amounts and FICO combinations become more limited (e.g., 720-739 FICO maxes at 70% LTV).
What to do: Re-evaluate the deal. Can you pay a lower purchase price? Can you increase the down payment to reduce the loan amount? Is the rent estimate too conservative? If the numbers still don’t work after adjusting variables, this might not be the right property—or the right time.
Strategic Scenarios: Playing “What If”
The real power of a DSCR calculator isn’t running one scenario, it’s running many. Here are the strategic questions you should be modeling:
Scenario 1: Rate Sensitivity
Run your deal at the current rate, then run it at +0.5% and +1.0%. How does your DSCR change? If a half-point rate increase drops you from 1.15x to 0.95x, your deal is rate-sensitive—and you should factor that into your urgency to lock.
Scenario 2: Rent Growth
What if you can increase rent by $100/month after the current lease expires? By $200? Model the DSCR at Year 1 rents versus Year 2 projected rents. This helps you understand when the property becomes more comfortable and whether it’s worth the short-term squeeze.
Scenario 3: Down Payment Trade-offs
Compare 20% down versus 25% versus 30%. More equity means a smaller loan, lower payments, and higher DSCR. It also means more cash tied up. The difference between LTV, LTC, and LTARV matters for understanding how leverage affects your financing options. Find the balance point where DSCR is strong enough for good financing without over-capitalizing the deal.
Scenario 4: Interest-Only vs. Fully Amortizing
Interest-only loans have lower payments, which means higher DSCR. But you’re not building equity through principal paydown. AHL offers 40-year DSCR loans with 10-year interest-only periods,and we qualify on the I/O payment during the I/O period.
Example: A deal that calculates at 0.95x DSCR with full amortization might hit 1.10x with interest-only. That difference could move you from sub-1.0 territory (requiring 12 months reserves and experience) to standard 1.0+ territory (3-6 months reserves, first-time investors OK).
Scenario 5: Short-Term Rental Income
If you’re considering an STR strategy, model the DSCR at both long-term rental income AND projected STR income. This shows you the downside if local regulations change or the STR market softens—and whether the property still works as a traditional rental.
Common Calculator Mistakes (And How to Avoid Them)
Forgetting Property Management
Even if you self-manage today, include a management fee in your analysis. Deals should work even if you eventually want to step back from day-to-day management.
Using Stale Insurance Quotes
Insurance costs have increased dramatically in many markets. Using an old quote or a guess can significantly distort your DSCR. Get a current quote for the specific property.
Ignoring Vacancy
The calculator assumes the property is rented. But you should stress-test your numbers assuming 5-10% vacancy over time. Can you handle a month vacant? Two months?
Over-Optimistic Rent Projections
“Zillow says I can get $2,200” is not a rent analysis. Look at actual recent leases for comparable properties. Talk to a property manager. Be conservative—it’s better to be pleasantly surprised than painfully disappointed.
From Calculator to Closing: Next Steps
Once you’ve run your numbers and the deal looks promising, here’s how to move forward:
- Get pre-qualified: Our loan officers can review your scenario and confirm what you’d qualify for—before you’re under the pressure of a signed contract. Start your pre-qualification.
- Refine your analysis: With program-specific rates and terms, you can dial in your DSCR calculation to be more precise. We’ll tell you whether you’re looking at Invest Star or Invest Star Plus pricing.
- Make your offer: Armed with real financing parameters, you can structure your offer with confidence.
- Move to full application: When you’re under contract, we’ll collect documentation, lock your rate at application, and move toward closing.
Try the Calculator Now
Ready to run your numbers? Head to our DSCR Calculator and start modeling your next investment property.
And if you want help interpreting the results—or you’ve got a deal that’s on the edge and you want to talk through options—contact our team or call (800) 745-9280. We’re happy to help you think through the numbers.
Because a calculator can tell you what the DSCR is. But it takes experience to know what to do about it.