Deal teardown 01 · Rent stress test
How a 10% Rent Drop Moved DSCR From 1.24x to 1.12x
The debt did not change. A $290 reduction in modeled monthly rent removed most of the deal's coverage cushion.
Published · Educational scenario
Scenario inputs and outputs
The numbers behind the result
- Modeled loan
- $262,500
- Baseline rent
- $2,900/mo
- Stressed rent
- $2,610/mo
- Estimated PITIA
- $2,335/mo
- Baseline DSCR
- 1.24x
- Stressed DSCR
- 1.12x
Reconciliation
Baseline
$2,900 rent ÷ $2,335 PITIA = 1.24x
10% rent stress
$2,610 rent ÷ $2,335 PITIA = 1.12x
A deal can remain above 1.00x and still lose meaningful breathing room. Stress the supportable rent before relying on a refinance, purchase, or lender-program threshold.
Only one assumption moved
The modeled loan amount, principal-and-interest payment, property taxes, insurance, HOA, and total PITIA stayed fixed. Monthly rent fell from $2,900 to $2,610. That one change reduced estimated DSCR by about 0.12x.
Why rent deserves a downside case
Asking rent is not always the same as collected rent or the amount a provider accepts. Vacancy, concessions, seasonality, appraisal market rent, lease terms, and provider calculations can create a lower usable figure.
- Run a baseline using a supportable lease or market-rent assumption.
- Run at least one lower-rent case before committing to debt service.
- Ask the provider which rent evidence and calculation will control.
- Keep repairs, vacancy, management, and capital expenditures in the investment analysis even when they are outside PITIA.
What the 1.12x result does—and does not—say
In this educational model, rent is 1.12 times estimated PITIA. It does not mean a provider will approve the loan. Credit, reserves, leverage, property eligibility, appraisal, documentation, pricing, and the provider's own DSCR method still control.
Run the same check on your deal
Stress-test my rental deal
Change rent, loan amount, rate, taxes, insurance, and HOA to see how the estimated coverage moves.
No account or contact details are required to run the calculation. Results are educational estimates, not an approval, commitment, or personalized rate quote.
Frequently asked
Does a 1.12x DSCR qualify for a DSCR loan?
It depends on the provider and the complete file. Some programs publish criteria near or below 1.12x, while others require more coverage or reduce leverage. The calculator is not an approval or quote.
Why use a 10% rent stress?
It is a simple sensitivity case, not a forecast. Use a decline that reflects the property's lease, market, vacancy, concessions, seasonality, and operating plan.
What is included in PITIA here?
Estimated principal, interest, property taxes, insurance, and HOA. Operating expenses such as repairs, management, utilities, vacancy, and capital expenditures should be analyzed separately.
More from the Deal Lab
Method note: this case uses the assumptions displayed above. Real transactions may include different rent treatment, expenses, value, costs, reserves, payoff items, timing, credit, documentation, property rules, pricing, and legal requirements. Verify current written terms directly with the provider and relevant professionals.