Debt Service Coverage Ratio (DSCR)
Financing Presentation
| Summary | 30-Yr Fixed | 30-Yr Interest-Only |
|---|---|---|
| Purchase Price | $249,999 | $249,999 |
| Down Payment | $50,000 (20%) | $50,000 (20%) |
| Loan Amount | $199,999 | $199,999 |
| Interest Rate | 6.125%/6.353% APR | 6.500% |
| Term (mos) | 360 | 360 |
| Principal & Interest | $1,215 | $1,083 |
| Property Tax | $209 | $209 |
| Insurance | $335 | $335 |
| HOA | $0 | $0 |
| Monthly Expenses | $1,759 | $1,627 |
| Monthly Income | $2,636 | $2,636 |
| DSCR | 1.499 | 1.620 |
| Monthly Profit | $877 | $1,009 |
| Annual Profit | $10,524 | $12,108 |
| Time to recover $50,000 down payment | 4.75 years | 4.13 years |
| (ignoring appreciation, tax benefits, rent increases, etc.) | ||
| Projected value after 5 years | $304,162 | $304,162 |
| (using 4% projected annual appreciation) | ||
DSCR Explanation
A 1.00 Debt Service Coverage Ratio (DSCR) for this property means that 100% of the Principal (excluding I/O), Interest, Property, Taxes, Insurance and any Association expenses payment will be covered at 20% down payment.
When evaluating income properties, many investors jump to CAP rate — but if you're using financing, DSCR is more important. CAP rate shows returns without debt; DSCR tells you if the property can actually cover the loan. A property might show an 8% CAP, but if DSCR is under 1.00, it's not covering the mortgage — that's a red flag. Verify the deal works with DSCR first; CAP rate is only meaningful once the debt is covered.