Start With the Formula
A simplified residential calculation is:
Qualifying Rent
divided by
Qualifying Property Debt
equals
DSCR
Example
Qualifying rent
$3,000
Qualifying debt obligation
$2,500
DSCR
1.20
That means the entered qualifying rent is approximately 120% of the entered qualifying debt amount.
What Does 1.00 Mean?
Conceptually:
- A 1.00 DSCR means income equals debt service.
- A ratio above 1.00 means the qualifying rent exceeds debt service.
- A ratio below 1.00 means rent does not fully cover it.
But lenders can price and underwrite these situations differently.
Why You Should Not Chase One Internet Number
You will see statements such as: "You need 1.25." That may be true for one lender or product. It is not a universal mortgage law.
Some programs may permit:
- Lower DSCR with more equity
- Higher pricing
- Stronger reserves
- Different property restrictions
Other lenders may require more.
The Real Investor Question
Do not ask only: Can the lender approve this property?
Ask: Do I want to own this property if rent barely covers the mortgage before maintenance, vacancy and management?
A lender's minimum is not necessarily an investor's healthy minimum.
Las Vegas Investor Reality
Your true operating expenses may include:
- HOA
- Insurance
- Property tax
- Repairs
- Vacancy
- Property management
- Pool maintenance
- Landscaping
- HVAC replacement
- Special assessments
A loan may technically qualify while the investment still produces unattractive cash flow.
How Lisa Helps
Lisa can help investors compare:
- Purchase price
- Comparable rents
- HOA costs
- Property condition
- Neighborhood demand
- Resale market
- Rental restrictions
The lender determines official DSCR.
