DSCR Breakdown - BPs NOI Calc

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DSCR Breakdown - BPs NOI Calc

Zac Vaughan
Real Estate Agent · Kansas City, MO · Member since 2021 · 26 posts · 14 votes

Hey BP community, I am currently looking at DSCR loans and my numbers never seem to add up to BPs, and I can never get a 1:1 it's always way less than 1.

Here is an example of a property I picked out just for practice. 

BP is telling me that my NOI is $56,424 but when I do the math ($6,800x12=$81,600) - ($4,584x12=$55,008) = $26,592 NOI 

I then take that $26,592/ ($2,487x12= $29,844) = .89

I've tried this formula with numerous properties and have never been able to get over 1. Can someone please explain what I am doing wrong?

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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
4y
Quote from @Zac Vaughan:

Hey BP community, I am currently looking at DSCR loans and my numbers never seem to add up to BPs, and I can never get a 1:1 it's always way less than 1.

Here is an example of a property I picked out just for practice. 

BP is telling me that my NOI is $56,424 but when I do the math ($6,800x12=$81,600) - ($4,584x12=$55,008) = $26,592 NOI 

I then take that $26,592/ ($2,487x12= $29,844) = .89

I've tried this formula with numerous properties and have never been able to get over 1. Can someone please explain what I am doing wrong?


 From most lender's standpoint, they only use the gross income divided by the mortgage payment including any association costs.  It's based on the gross, not the net.

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    DSCR needs large down payment to cash flow, or large equity to refinance.

    1Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    4y
    Quote from @Zac Vaughan:

    Hey BP community, I am currently looking at DSCR loans and my numbers never seem to add up to BPs, and I can never get a 1:1 it's always way less than 1.

    Here is an example of a property I picked out just for practice. 

    BP is telling me that my NOI is $56,424 but when I do the math ($6,800x12=$81,600) - ($4,584x12=$55,008) = $26,592 NOI 

    I then take that $26,592/ ($2,487x12= $29,844) = .89

    I've tried this formula with numerous properties and have never been able to get over 1. Can someone please explain what I am doing wrong?


     From most lender's standpoint, they only use the gross income divided by the mortgage payment including any association costs.  It's based on the gross, not the net.

    1Reply
  • John Hernandez
    Member since 2022 · 47 posts · 39 votes
    4y

    Use this calculator to double check your math:

    https://www.calculator.net/ren...

    1Reply
  • Zac Vaughan
    OP
    Real Estate Agent · Kansas City, MO · Member since 2021 · 26 posts · 14 votes
    4y
    Quote from @Caroline Gerardo:

    DSCR needs large down payment to cash flow, or large equity to refinance.


     Yes, we're calculating 20% down

    0Reply
  • Zac Vaughan
    OP
    Real Estate Agent · Kansas City, MO · Member since 2021 · 26 posts · 14 votes
    4y
    Quote from @Stephanie P.:
    Quote from @Zac Vaughan:

    Hey BP community, I am currently looking at DSCR loans and my numbers never seem to add up to BPs, and I can never get a 1:1 it's always way less than 1.

    Here is an example of a property I picked out just for practice. 

    BP is telling me that my NOI is $56,424 but when I do the math ($6,800x12=$81,600) - ($4,584x12=$55,008) = $26,592 NOI 

    I then take that $26,592/ ($2,487x12= $29,844) = .89

    I've tried this formula with numerous properties and have never been able to get over 1. Can someone please explain what I am doing wrong?


     From most lender's standpoint, they only use the gross income divided by the mortgage payment including any association costs.  It's based on the gross, not the net.


     I'm a little confused. Can you explain? You're suggesting I take my gross annual income of $81,600 and dived that by my annual mortgage payments of $29,832?

    0Reply
  • Zac Vaughan
    OP
    Real Estate Agent · Kansas City, MO · Member since 2021 · 26 posts · 14 votes
    4y
    Quote from @John Hernandez:

    Use this calculator to double check your math:

    https://www.calculator.net/ren...

    Thank you, John!
    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    @zac 

    @Zac Vaughan 

    Market rents minus principle, interest, property tax, fire insurance, and HOA. ARM loans at fully indexed no IO or start rate.

    If $6800 is long term market rents total and appraiser verifies. $950000. sales price PITI with 20% down $6600 PITI covers and leaves wiggle room with no HOA.

    In general 20% down does not cash flow in most markets. In Coastal California a $950000 condo can rent for $5900 and you would need 30% down to cover the PITI and $500 HOA

    You also need cash reserves- your total everything on the credit plus subject X 12 is the cash you need to show. 

    0Reply
  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    @Zac Vaughan

    We take the monthly principal, interest, taxes, & insurance figures and add them together. Once you have this figure simply multiple by 1.1 and this will give you the required rent figure for the loan to work. Lenders are not adding any other expenses to the DSCR. (unless HOA is involved)

    [email protected]413-348-8346
    Freedom Capital Funding, LLC523 Reviews
    WebsiteView Page
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