What is DSCR?
Debt Service Coverage Ratio (DSCR) measures how well a property’s income covers its loan payments.
Formula:
DSCR = Net Operating Income ÷ Annual Debt Service
Why It Matters
For Lenders: DSCR is the #1 number banks use to determine loan eligibility and risk.
For Investors: It shows whether your property can service its debt comfortably.
Thresholds: A DSCR of 1.0 means just breaking even. Most lenders require 1.25+ for investment properties.
Example
Phoenix duplex NOI = $36,000/year
Annual mortgage payments = $28,000/year
DSCR = 36,000 ÷ 28,000 = 1.29
This means the property generates 29% more income than needed to cover debt payments — a healthy buffer.
DSCR in Phoenix Today
Lenders often look for 1.25–1.35+ depending on property type and borrower profile.
Higher DSCR = safer deal = better financing terms.
Properties in Phoenix’s growing rental submarkets (like Surprise, Scottsdale, Norterra) tend to perform well against this benchmark.
Final Thoughts
DSCR isn’t just for banks — smart investors use it too. It protects you from thin margins and helps ensure your deal can withstand market fluctuations.
As Phoenix’s go-to investor-friendly agent, I’ll help you evaluate DSCR alongside other critical metrics to make sure your next property not only cash flows but also qualifies for the right financing.
📞 Contact Me Today
Brian Harris
Investor-Friendly Real Estate Agent
📍 Phoenix, AZ
📧 [email protected] | 📞 602-684-0198
🌐 www.azdreamsource.com