DSCR Ratio Math: A Worked Example on a $180,000 Rental

Take a $180,000 three bedroom in a solid voucher market. You are putting 20% down, so the loan is $144,000. At 7.5% on a 30 year fixed, principal and interest is roughly $1,007 per month.

Add the escrows. Taxes at $2,400 a year is $200 a month. Insurance at $1,800 a year is $150 a month. No HOA. Your PITIA is about $1,357.

Now the income. The payment standard supports $1,650 in contract rent. Divide $1,650 by $1,357 and you get a DSCR of 1.22. That clears every common threshold except the premium 1.25 tier, and it clears it without a single tax return.

Watch what happens if you move one variable. Drop the down payment to 20% but buy in a county where taxes are 2.1% instead of 1.3%: escrows jump about $120 a month, coverage falls to 1.12. Tax rate is frequently the difference between two otherwise identical deals, and it is the input investors most often estimate from memory.

The other lever is the down payment itself. Going from 20% to 25% on this deal cuts P&I to about $944 and lifts coverage to 1.28 — enough to reach better pricing. Whether that is worth the extra $9,000 of cash depends on how many more doors you plan to buy this year.

Run this calculation on every deal before you write an offer. If it lands under 1.00, you are not looking at a financing problem, you are looking at a price problem.