The arithmetic

DSCR = net operating income ÷ annual loan payment. Net operating income is the rent that actually comes in (after vacancy) minus the cost of operating the building — taxes, insurance, maintenance, management — but before the loan payment. A building that nets $24,000 a year against a $20,000 loan payment has a DSCR of 1.20.

The number they want

1.20 is the common floor: the lender wants the building earning 20% more than the loan costs, as a cushion. Some will take 1.10, or 1.00 with a bigger down payment or a higher rate. Below 1.00 the property doesn't pay for itself — and the lender sees that as clearly as you do.

How to move it

There are only three levers: raise the rent, cut the expenses, or lower the payment — with more down or a longer term. Note that a longer term improves DSCR while increasing what you pay overall; those aren't the same decision.

Watch the assumptions

A DSCR built on the rent you hope to charge, with no maintenance reserve, looks much better than the real one. Use what comparable units are actually renting for today, and subtract vacancy and maintenance even when the lender doesn't make you. The number worth knowing is the one that still works in a bad year.