How do I improve DSCR on a marginal deal?

Three levers: raise the rent to the market (increases NOI), drop the price (reduces debt service), or increase the down payment (reduces debt service). Buying down the rate is usually the worst lever — too expensive per basis point of DSCR improvement.

What's the difference between DSCR and cap rate?

Cap rate is unlevered yield (NOI ÷ price). DSCR is the safety margin on your specific debt. A property can have a great cap rate and a terrible DSCR if you over-leverage it, or vice versa.

Should I include vacancy in the NOI?

Yes — lenders use stabilized NOI, which assumes a normal vacancy reserve (typically 3–5%). Don't use the property's gross potential rent without a vacancy haircut, or you'll overstate DSCR vs. what the bank will actually compute.

Is DSCR the same as the "debt-to-income" ratio?

No. DSCR applies to the property's income vs. its debt — used for income-property lending. Debt-to-income (TDS/GDS) applies to your personal income vs. your total debt — used for owner-occupied mortgages.

What is CMHC MLI Select?

CMHC's flagship multi-family insurance program. It allows higher LTV (up to 95%) and lower DSCR (down to 1.10×) in exchange for affordability commitments, energy-efficiency targets, or accessibility features. Big advantage if your project qualifies.

DSCR · Lender ratio

Will the lender fund this deal?

DSCR is the single number commercial and small-multi lenders use to size your loan. NOI ÷ annual debt service. Most want at least 1.20×; CMHC MLI Select goes lower with concessions; private lenders accept lower with higher rates.

Assumptions

Annual NOI

Net operating income — gross rent minus operating expenses, before mortgage.Annual debt service

Sum of all monthly mortgage payments × 12.

Results

DSCR

1.32×

Conventional lenders≥ 1.20× ✓

CMHC MLI Select≥ 1.10× ✓

Headroom vs 1.20×0.12×

NOI$42,000

Debt service$31,800

Foncier the whole deal

This number is one of seventy.

Cap rate is a start. The full Foncier analyzer adds DSCR, IRR, ten-year cashflow projections, scenarios, side-by-side compare, and live community rent comps — for free, on your first three deals.

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How this is calculated

DSCR = NOI ÷ debt service. Conventional Canadian lenders typically want ≥ 1.20×. CMHC MLI Select goes as low as 1.10× for affordability or energy-efficiency concessions. Private/alt lenders sometimes fund 1.00× at much higher rates.

Worked examples

DSCR ratios on real Quebec deals.

Plateau triplex · qualifies

DSCR 1.32×

NOI $42,000 / annual debt service $31,800 = 1.32×. Comfortable headroom over the 1.20× conventional threshold.

NOI$42,000

Debt service$31,800

DSCR1.32×

VerdictPass

Older duplex · marginal

DSCR 1.08×

NOI $26,000 / debt service $24,000 = 1.08×. Below conventional threshold; might fit CMHC MLI Select if energy-efficient or rent-controlled.

NOI$26,000

Debt service$24,000

DSCR1.08×

VerdictMLI only

DSCR questions

About debt service coverage ratio.

Conventional Canadian lenders want 1.20×+ on small multi-family. CMHC MLI Select goes to 1.10× with concessions. Private lenders accept 1.00× but charge significantly higher rates. Above 1.40× gives you real safety margin and refi flexibility.

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