Debt Service Coverage Ratio (DSCR) measures how comfortably a property's income covers its mortgage payment:
A DSCR of 1.25x means the property earns 25% more than the mortgage requires each year. Below 1.0x means the property doesn't cover its own debt payment — a red flag to any lender.
Two numbers, not one
Every deal page shows DSCR twice, because one number can hide a problem:
- As-stated. DSCR using NOI exactly as the listing/lease information implies — no adjustment.
- Stress. We cut that same NOI by 15% first — a buffer for vacancy, an unexpected repair, expenses creeping up — then recalculate DSCR from the reduced number. This mirrors what a conservative lender does before signing off on a loan.
A deal that looks comfortable as-stated can get tight fast once you assume a slightly worse year. That gap between the two numbers is exactly what separates a real cushion from a number that only works if nothing goes wrong.
Why 1.25x is the line we build around
We treat a 1.25x stressed DSCR as the comfort line for financing — it's the threshold our target offer price is built to clear. It's a screening heuristic, not a lender's actual approval — your real lender may set their own minimum, and it may differ from ours.
Where the inputs come from
The "debt payment" side of this ratio comes from a fixed financing case we apply to every listing — see the financing assumptions guide for why it's fixed instead of deal-specific.