How the DSCR Is Calculated on an Ohio Rental (With the Math Shown)

The formula in one line

The debt service coverage ratio answers one question: does this property’s rent pay its mortgage? For a residential rental, most wholesale DSCR lenders write it like this: DSCR equals gross monthly rent divided by monthly PITIA. PITIA is principal, interest, taxes, insurance and association dues.

That is simpler than the version commercial lenders use for apartment buildings, which starts from net operating income after vacancy, repairs, management and utilities. Residential DSCR programs usually skip those operating expenses and compare gross rent directly with the housing payment. It is a deliberate simplification, and it is why you should still run your own full cash-flow analysis. A property can clear a lender’s ratio and still lose money once you account for a furnace replacement and a month of vacancy.

Building the denominator, line by line

Principal and interest come from three inputs: loan amount, interest rate and amortization. A thirty-year fully amortizing loan is common. Some lenders offer an interest-only period, which lowers the payment for the first years and can raise the ratio; others qualify interest-only loans on the amortizing payment anyway. Ask which payment the lender will use, because the answer can move the ratio noticeably.

Property taxes are the line Ohio investors most often get wrong. The tax bill you see on a listing reflects the current owner’s valuation and any credits that owner receives. Ohio offers an owner-occupancy reduction on primary homes that does not carry over to a rental, and a sale can lead the county auditor to revisit the value at the next reappraisal or update. Underwriters frequently estimate taxes from the purchase price, so you should too.

Insurance means a landlord or dwelling fire policy, not a homeowner’s policy. On older Ohio housing, roof age, wiring, plumbing and heating type can all push the premium higher. Get an actual quote early rather than plugging in a guess. Flood insurance, when the property sits in a mapped flood zone, belongs in this line too.

Association dues apply to condos, townhomes and some newer subdivisions. They are usually small in Ohio’s older urban neighborhoods but can be meaningful in suburban communities with amenities.

Choosing the numerator: which rent counts

The rent side looks easy until you learn that lenders do not all agree on which rent to use. On a purchase, the most common source is the appraiser’s rent schedule, where the appraiser compares your property with nearby rentals and estimates market rent. If the property is already leased, some lenders use the lease, some use the appraiser’s figure, and some use the lower of the two.

That “lower of” rule matters in Ohio neighborhoods where condition varies block to block. If you renovated a double to a higher standard than the rentals around it, your lease may be above what the appraiser can support with comparables. Conversely, a long-term tenant paying below market may drag the ratio down if the lender insists on the lease amount. Knowing each lender’s rule is half the battle, and it is a big part of why using a broker helps.

Short-term rental income is its own category. Some lenders accept documented platform income, others use a market-rent estimate for a long-term lease, and some decline the property type altogether.

A worked example

Suppose you are buying a brick double in an older Ohio neighborhood. The appraiser’s rent schedule supports $1,050 per unit, or $2,100 total. You enter your loan amount, rate and term into our calculator, and the principal and interest come out to a figure we will call P&I. County taxes, based on your purchase price, come to $3,000 a year, or $250 a month. A landlord policy quote is $1,500 a year, or $125 a month. There is no HOA.

Your PITIA is P&I plus $375. If P&I were $1,300, PITIA would be $1,675, and the DSCR would be $2,100 divided by $1,675, or about 1.25. If you shopped for a larger loan and P&I rose to $1,500, the PITIA would be $1,875 and the ratio would fall to about 1.12. Same building, same rent, different leverage, different ratio. This example is illustration only; the payment figures are placeholders, not a rate or an offer.

How lenders read the result

There is no single passing grade. Many programs set a floor at or near 1.00, and pricing, leverage or both tend to improve as the ratio rises. Some lenders offer programs for ratios below 1.00 when other parts of the file are strong, such as high credit, significant reserves or low leverage. Those programs usually cost more and allow less leverage.

The ratio also interacts with everything else in the file. A strong ratio does not rescue a property in poor condition, and a modest ratio might be fine on a low-leverage loan with deep reserves. Think of the DSCR as the first gate rather than the whole underwriting decision.

Practical ways to improve a tight ratio

If your numbers land just short, there are four levers. Lower the loan amount with a bigger down payment. Lower the insurance by shopping carriers or addressing items that drive the premium, such as an old roof. Confirm the tax estimate is accurate rather than conservative. And make sure the rent figure reflects real market rent, with comparables you can hand the appraiser.

What you should not do is stretch the rent on paper. Lenders verify it, and an inflated number only delays the moment you learn the deal does not work.