DSCR Underwriting Math · 7 Min Read · Arizona Private Money Lenders — Compare 2,404 Wholesale Bridge, Infill Lot & Construction Shelves

How DSCR Is Calculated for 1–4 Unit & 5–9 Unit Investment Properties (2026 Line-by-Line Guide)

Bottom Line Up Front (Quick Answer):For 1–4 unit residential investment properties, DSCR equals Gross Monthly Rent (the lesser of the executed lease or Appraiser Form 1007 market rent, or 100% of Form 1007 on vacant purchases/STRs) divided by Monthly PITIA (Principal + Interest + Property Taxes + Landlord Hazard/Flood/Wind Insurance + HOA Dues). A 1.00x DSCR means rent exactly covers PITIA; 1.20x+ unlocks Tier-1 par wholesale pricing.

1. The 1–4 Unit Gross-Rent DSCR Formula vs. 5+ Unit Commercial NOI DSCR

On 1–4 unit residential investment properties, wholesale DSCR lenders use a gross-income ratio: DSCR = Gross Monthly Qualifying Rent ÷ Monthly PITIA. Management fees, maintenance reserves, and vacancy assumptions are not deducted from the numerator on 1–4 unit loans.

On 5–9 unit and 10+ unit commercial multifamily loans, underwriters switch to Net Operating Income (NOI): DSCR = Annual NOI (Gross Rent − Vacancy − Operating Expenses) ÷ Annual Principal & Interest Debt Service.

2. Post-Close Tax Reassessment & Coastal Windstorm Insurance Pitfalls

The #1 reason a projected 1.20x DSCR drops to 0.95x during underwriting is underestimating post-acquisition property tax reassessment or coastal windstorm insurance. Use our 100-County Tax & Insurance Atlas (/county-atlas) to verify exact county millage and reassessment rules before submitting your offer.

Frequently Asked Questions

Does interest-only (IO) payment structure increase qualifying DSCR?

Yes, on wholesale shelves that qualify using the initial 10-year interest-only payment (ITIA), removing principal amortization increases your DSCR ratio by 12% to 18%.

More Quantitative Investor Guides

How DSCR Is Calculated for 1–4 Unit & 5–9 Unit Investment Properties (2026 Line-by-Line Guide) | Arizona Private Money Lenders — Compare 2,404 Wholesale Bridge, Infill Lot & Construction Shelves