What is a good DSCR ratio for a Phoenix rental property in 2026?

Most DSCR lenders in Arizona look for a ratio of 1.0 or higher, meaning the monthly rent covers 100% of the mortgage payment (PITIA). A DSCR of 1.25 or higher usually unlocks the best interest rates.

Does Maricopa County property tax affect my DSCR?

Yes. The Debt Service in DSCR includes Principal, Interest, Taxes, Insurance, and HOA fees (PITIA). Maricopa County's property taxes must be factored into your monthly expenses.

Can I use projected rent to calculate DSCR for a vacant Phoenix property?

Yes. If the property is currently vacant, lenders will use the 'market rent' determined by the appraiser (using Form 1007) to calculate your Debt Service Coverage Ratio.

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How to Calculate DSCR for a Phoenix Rental Property (With Examples)

The DSCR (Debt Service Coverage Ratio) is the single most important number in an investor loan. It is the simple formula that determines if your property qualifies for financing without needing to show your personal tax returns. Let's break down exactly how it works in the Arizona market.

The Formula

The formula might sound like complex Wall Street jargon, but it is incredibly simple. It is just your property's gross income divided by its total expenses.

DSCR = Gross Rental Income / PITIA

Gross Rental Income: This is the total monthly rent you receive. For a new purchase or vacant property, the lender will use the appraiser's projected rent from the "Comparable Rent Schedule" (Form 1007).
PITIA (Debt Service): This is your total monthly mortgage obligation: Principal, Interest, Property Taxes, Homeowners Insurance, and any HOA (Homeowners Association) fees.

If the result is exactly 1.0, the property breaks even. If it is 1.25 or higher, the property "cash flows" beautifully and qualifies for the absolute best interest rates on our main DSCR loan program.

Example 1: The Phoenix Single-Family Rental

Let's look at a standard 3-bedroom investment property in North Phoenix.

Projected Gross Rent: $2,800 / month
Proposed Mortgage (P&I): $2,000 / month
Property Taxes: $250 / month
Homeowners Insurance: $150 / month
HOA Dues: $0 / month

Step 1 (Calculate PITIA): $2,000 (P&I) + $250 (Taxes) + $150 (Insurance) = $2,400

Step 2 (Calculate DSCR): $2,800 (Rent) / $2,400 (PITIA) = 1.17 DSCR

Result: Approved! Since 1.17 is greater than 1.0, this property easily qualifies for financing.

Example 2: The Borderline Condo

What happens if the numbers are tight on a Scottsdale condo?

Projected Gross Rent: $2,100 / month
Proposed Mortgage (P&I): $1,500 / month
Property Taxes: $200 / month
Homeowners Insurance: $120 / month
HOA Dues (High): $200 / month

Step 1 (Calculate PITIA): $1,500 + $200 + $120 + $200 = $2,020

Step 2 (Calculate DSCR): $2,100 / $2,020 = 1.04 DSCR

Result: Approved! Even though the HOA fee dragged the cash flow down, 1.04 is still greater than 1.0, so the loan works.

DSCR Calculation FAQs

What happens if my DSCR is below 1.0?

If your ratio is below 1.0 (meaning the property operates at a monthly loss), you can still get a loan! However, it is considered a "No-Ratio" DSCR loan. You will typically be required to put down a much larger down payment (e.g., 30% to 35%) and you will face slightly higher interest rates to offset the lender's risk.

Does the DSCR formula include maintenance or vacancy costs?

No. For standard residential DSCR loans (1-4 units), the lender only looks at Gross Rent vs. PITIA. They do not deduct property management fees, expected vacancy rates, or general maintenance from the income side. This makes it much easier to qualify than commercial loans.

Can I calculate DSCR for a short-term rental (Airbnb)?

Yes! Many DSCR lenders now allow you to use a 12-month average of projected short-term rental income (often sourced from data providers like AirDNA) to calculate the gross rent portion of the formula.

Have an investment property in mind?

Send us the address and the expected purchase price. We will run a full DSCR analysis and provide you with a pre-approval letter instantly.

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Jonathan Moses

Senior Loan Officer | ✅ Verified NMLS #2064741

This guide was prepared by Jonathan Moses (NMLS #2064741), the senior loan officer and founder of Roadrunner AZ Lending. With years of experience in the Phoenix and Scottsdale markets, Jonathan is dedicated to providing expert, transparent advice. Learn more about Jonathan.

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