A residential DSCR lender divides gross rent by PITIA. Principal, interest, taxes, insurance and HOA dues. That is the whole formula. It does not subtract vacancy, it does not subtract maintenance, it does not subtract a capital reserve, and it does not subtract management. Every lender calculator online runs that arithmetic, tells you that you qualify, and stops there, because qualifying is the product they sell.
You still pay all four. This one prices them, then shows you both figures on the same screen: what the underwriter sees and what lands in your account. It also gives you the rent at which the property breaks even, the highest price that still clears the return you said you would accept, and the three ordinary ways a working rental stops working.
What the lender's ratio leaves out
Vacancy. Not a disaster, an average. Turnover, showings, the two weeks between tenants. Nearly 40% of listings were offering concessions in early 2026, which is what a soft rental market looks like before it shows up in the rent number.
Maintenance. The water heater, the roof patch, the call at 11pm. Charged as a percentage of rent because that is roughly how it scales.
Capital expenditure. The roof, the HVAC, the kitchen. You are not paying for it this month, which is exactly why people forget to set it aside and then finance it later at a worse rate.
Management. Eight to ten percent if you hire it out. If you self-manage you are not saving it, you are earning it, and you should know what the job pays before you take it.
The rent assumption itself. Lenders take the lower of your signed lease and the appraiser's market rent. A lease above market does not help you.
How to use it
Start with the three numbers you can verify: the purchase price, the rent the property actually commands, and what it needs before a tenant moves in. Pull the tax figure from the county rather than the listing, because listings show the seller's assessment and yours resets on sale. Everything else is pre-filled with ordinary 2026 terms you can change to match your own lender.
Then read the two figures side by side. If the DSCR clears and the cash flow does not, you are looking at a loan you can get and a property you should not buy. That is the most common shape of a bad rental deal, and it is invisible on any calculator that only prints one of the two.
The terms, in plain English
DSCR (debt service coverage ratio). For residential rental lending, gross monthly rent divided by monthly PITIA. A 1.25 DSCR means rent covers the housing payment 1.25 times over. Commercial lenders use a different version of this ratio, net operating income over debt service, which is why you will find the term defined two ways online, sometimes on the same lender's website.
PITIA. Principal, interest, taxes, insurance and association dues. The full monthly obligation attached to the property, and the denominator of the ratio your loan is approved on.
Net operating income. Rent less vacancy, maintenance, management, taxes, insurance and fixed fees. It excludes the mortgage and, by convention, excludes the capital reserve. Useful for comparing properties to each other, not for predicting your bank balance.
Cash-on-cash return. A year of cash flow divided by the cash you actually brought: down payment, rehab and closing costs. The only return figure that answers the question you are really asking, which is what this money would have earned somewhere else.
Break-even rent. The rent at which the property costs you nothing and pays you nothing, after every reserve. The distance between this and market rent is your margin for a soft year.
Reserves. Two different meanings, and lenders use both. In underwriting, months of PITIA you must show in the bank at closing, often six to nine. In operating a rental, the percentages of rent you set aside monthly for vacancy, maintenance and capital work. This tool means the second.
Cash to close. Down payment plus rehab plus closing costs. The number that determines whether you can do this deal at all, and the denominator of every return figure worth reading.
A worked example
An ordinary rental. Purchase $210,000, rent $2,250, $6,000 to make it ready, 25% down at 7.25% over 30 years. Taxes $3,300 a year, insurance $1,500.
Line | Monthly |
|---|---|
Principal and interest | $1,074 |
Taxes, insurance, HOA | $400 |
PITIA, the lender's denominator | $1,474 |
DSCR at $2,250 rent | 1.53 |
A 1.53 DSCR is comfortably inside the tier where lenders price best. The loan is not in question. Now the four costs the ratio ignored:
Reserve | Monthly |
|---|---|
Vacancy at 6% | $135 |
Maintenance at 8% | $180 |
Capital reserve at 8% | $180 |
Management at 8% | $180 |
Monthly cash flow | $101 |
$101 a month. A 1.9% return on the $63,500 of cash brought to the table, on a property the underwriter scored 1.53. Two months vacant in a year turns it negative. So does a rate a point higher.
The sharper version of the same point: hold everything else fixed and drop the rent to $1,769. The DSCR is still 1.20, the number most lenders treat as the good-pricing tier. The property now loses you $236 a month.
Questions people ask
How is DSCR calculated on a rental property?
Residential DSCR lenders divide gross monthly rent by monthly PITIA: principal, interest, taxes, insurance and association dues. A $3,000 rent against a $2,400 PITIA is a 1.25 DSCR. Commercial lending uses a different formula, net operating income divided by debt service, which produces a lower number on the same property. If a calculator does not tell you which one it is running, check whether it subtracted your operating costs before you compare it to a lender quote.
Does DSCR include vacancy, maintenance or property management?
No. The residential DSCR formula uses gross rent, before any operating cost is deducted, and PITIA, which contains no reserve of any kind. Vacancy, maintenance, capital expenditure and management are all excluded from the ratio your loan is approved on, and all four are paid by the owner. This is the single most important thing to understand about DSCR lending.
What DSCR do lenders require?
1.00 is a common floor, meaning rent exactly covers PITIA. Most programs price best at 1.20 to 1.25 and above. Some lenders will fund below 1.00 with a larger down payment, stronger credit or more months of reserves. The minimum is set by the lender rather than by any regulation, so it moves with the market and varies between programs at the same institution.
Can a property have a good DSCR and still lose money?
Yes, and it is common. Because the ratio ignores vacancy, maintenance, capital reserves and management, a property can clear 1.20 while producing negative cash flow once those four are funded. On a $210,000 rental at 25% down and 7.25%, a rent of $1,769 still scores a 1.20 DSCR and loses the owner roughly $236 a month. The loan approval is not a verdict on the investment.
What is PITIA?
Principal, interest, taxes, insurance and association dues. It is the full monthly obligation attached to the property, and it is the denominator of the DSCR ratio. It is also the unit lenders count cash reserves in, so a requirement of six months reserves means six times this figure sitting in an account at closing.
How much should I set aside for maintenance and capital expenditure?
Common working figures are 5% to 10% of rent for maintenance and another 5% to 10% for capital expenditure, set aside monthly rather than found later. Older properties, older roofs and older mechanical systems sit at the top of those ranges. The reason both are expressed as a percentage of rent rather than of purchase price is that rent tracks the size and condition of the building more closely than the price does.
Do lenders use my lease or market rent?
Usually the lower of the two. The appraiser files a market rent opinion, most often on Form 1007, and the underwriter compares it to your signed lease. A lease above market will not raise your DSCR, and a vacant property is typically underwritten on the appraiser's figure alone.
What is a good cash-on-cash return on a rental?
There is no universal number, which is why the tool asks for yours. What matters more is whether the return survives an ordinary bad year. A return that goes negative after two months of vacancy was never really that return, it was a bet on continuous occupancy.
Is my data saved anywhere?
No. Deals you name and save are stored in your own browser and never sent to us. Clearing your browser data removes them, and they do not follow you to another device.
Where the numbers come from
The loan defaults reflect ordinary 2026 residential DSCR terms: 20% to 25% down, rates in the high 6s to low 8s, and minimums clustered at 1.00 to 1.25 depending on program and credit. Rent context on this page traces to named public sources, including Rentometer's mid-year single-family rental report and Zillow's monthly rent index. National single-family rents were down 1.6% year over year through the first half of 2026, the first sustained national decline since the pandemic run-up, which is the environment these reserves are sized for. We do not take payment for coverage and we do not publish price predictions.
Educational only. Not financial, legal, or tax advice. Loan terms, operating costs, taxes and rents vary by lender, property, and location. Verify every assumption with qualified professionals before investing.
