How to Improve DSCR on Rental Property

Why Your DSCR Matters for Loan Approval

If your rental property’s DSCR falls below lender minimums, you may face higher rates, larger down payments, or outright denial. The good news: DSCR is a ratio you can actively improve by adjusting the inputs.

Since DSCR = NOI / Debt Service, you can improve it by either increasing income or decreasing expenses and debt costs.

5 Ways to Increase Your DSCR

1. Increase Rental Income
Raise rents to market rate or above. Consider adding value through renovations that justify higher rents. Even a $100/month increase can significantly move your DSCR.

2. Reduce Operating Expenses
Shop for better insurance rates, appeal property tax assessments, and negotiate vendor contracts. Every dollar saved goes directly to NOI.

3. Make a Larger Down Payment
A bigger down payment reduces the loan amount, which lowers the monthly debt service. Going from 20% to 25% down can boost DSCR by 0.10 or more.

4. Buy Down the Interest Rate
Paying points upfront to reduce the rate lowers your monthly payment. This costs cash at closing but improves the ongoing DSCR.

5. Choose a Longer Loan Term
A 30-year amortization produces lower monthly payments than a 25-year or 15-year term, directly improving DSCR.

Example: Improving DSCR From 1.05 to 1.25

A property generates $2,500/month in rent with $700 in expenses. NOI = $1,800/month. The mortgage is $1,714/month.

Current DSCR: $1,800 / $1,714 = 1.05 (below most lender thresholds).

By raising rent $200/month and reducing expenses $100/month: NOI = $2,100. New DSCR: $2,100 / $1,714 = 1.23 (qualifies with most lenders).

Model Your Improvements

Use our calculator to test different rent, expense, and loan scenarios to find the combination that pushes your DSCR above lender thresholds.