Benchmark guide
What Is a Good DSCR Ratio?
A good DSCR ratio is usually high enough to give the lender confidence that property income can cover debt service even if expenses or income move against the borrower.
Rule of thumb
For many rental property loans, 1.25 is a practical benchmark. A 1.25 ratio means the property generates $1.25 of income for every $1.00 of debt service.
| Ratio | Meaning |
|---|---|
| 0.90 | Income is below required debt service. |
| 1.00 | Income equals debt service, with no cushion. |
| 1.25 | Income is 25% above debt service. |
| 1.50 | Strong coverage, assuming inputs are realistic. |
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Frequently asked
What is a good DSCR ratio?
A good DSCR ratio is usually high enough to give the lender confidence that property income can cover debt service even if expenses or income move against the borrower. For many rental property loans, 1.25 is a practical benchmark, meaning the property generates $1.25 of income for every $1.00 of debt service.
What does a DSCR below 1.00 mean?
A DSCR below 1.00 means the property's income is below the required debt service, so rent alone does not cover the full monthly payment.