DSCR, or debt service coverage ratio, measures a property's or business's net income against its loan payments, calculated by dividing net operating income by the total debt payment due. A DSCR above 1.0 means the income covers the debt payment, and lenders set a minimum, often around 1.2, before approving a loan secured by rental income rather than the borrower's personal income.
Why it matters
A low DSCR is often the reason a rental property cannot qualify for financing even when the price looks reasonable.