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Cap rate and DSCR calculator
Check a commercial or investment property in a minute: net income, cap rate, cash flow, return on your cash and whether the income covers the loan.
Cap rate and DSCR check
Enter the deal. See the return, the cash flow and whether the income covers the loan payment.
Disclosure: These tools are for a quick idea only, not advice or a loan offer. Real market data, property due diligence, lender terms and your own situation decide the final numbers once you finalize a deal and apply. Verify every result with your agent, loan officer, CPA or attorney before you decide.
How the calculator works
- Net operating income (NOI) is gross income, less vacancy, less operating expenses.
- Cap rate is NOI divided by the purchase price.
- DSCR is NOI divided by the yearly loan payments. Above 1.00 means the income covers the loan.
- The chart compares your cap rate with the loan rate and the 10-year Treasury.
Common questions
What is a cap rate?
The cap rate is the yearly net operating income divided by the price. A property with $55,000 of NOI bought for $1,000,000 has a 5.5% cap rate.
What is DSCR?
Debt service coverage ratio is net operating income divided by the yearly loan payments. A DSCR of 1.25 means the property earns 25% more than the loan payments.
What DSCR do lenders look for?
It depends on the lender, the property type and the loan program. Many commercial and DSCR lenders look for about 1.20 to 1.25 or higher. Ask your loan officer for the exact requirement.
What is negative leverage?
When the cap rate is lower than the loan rate, borrowing lowers your return on cash instead of raising it. It is common when interest rates are high relative to prices.