What is it? (plain English)
DSCR measures whether a rental property's income covers its debt payment. It's calculated as the property's rental income divided by its total payment (principal, interest, taxes, insurance, and any association dues). A DSCR of 1.0 means the rent exactly covers the payment; above 1.0 means it more than covers it.
Who is it for?
Rental and buy-and-hold investors — because DSCR can determine both whether you qualify for a DSCR loan and how good your terms are.
When might it make sense?
Whenever you're financing a rental on its cash flow rather than your personal income, or evaluating whether a rental actually pencils as an investment.
Good to know
A higher DSCR generally unlocks better terms; a lower one (especially below 1.0) means tighter terms or more reserves, where available at all. Lenders may use market rent, not just your actual rent, and the full payment — not just principal and interest — goes into the math.
Potential advantages
You can qualify a rental without personal income documentation, evaluate deals consistently, and see how sensitive your cash flow is to rate changes.
Potential limitations
DSCR is rate-sensitive — a deal that works today may not at a higher payment. It's a snapshot, not a guarantee of performance, and vacancy or expenses can erode the real-world cushion.
Documents you may need
Realistic rent (or market-rent support), and the full property payment including taxes, insurance, and dues.
Questions to ask before you choose
- What's my DSCR at today's payment — and at a higher one?
- Am I using actual or market rent?
- Does the deal still cash-flow with a vacancy cushion?
- How does my DSCR affect my terms?
How Kyon helps
We help you calculate DSCR at realistic, stress-tested numbers — so you're asking "does this still cash-flow at this rate?", not just "what's the rate?"