The 1.20 DSCR walk-away rule, with the actual math
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Every listing on this site shows a DSCR. It's the first number we look at and the one we walk away on. This post is the whole calculation, no hand-waving, so you can check our work or run it on your own deal.
What DSCR is
Debt-service coverage ratio is monthly rent divided by the monthly cost of owning the house with a loan on it:
DSCR = rent ÷ (principal + interest + taxes + insurance)
That denominator is what lenders call PITIA (the A is association dues, which most Indianapolis single-family houses don't have). A DSCR of 1.00 means the rent exactly covers the mortgage, taxes and insurance. Above 1.00 the house pays you. Below it, you pay the house.
The assumptions we use on every listing
We compute the same way for all 6,500 Indianapolis listings in the feed, so the number is comparable house to house:
| Loan-to-value | 75% (you put 25% down) |
|---|---|
| Rate | 7.5%, 30-year fixed |
| Insurance | 0.5% of price per year |
| Property tax | County assessor's bill when we have it, otherwise 1.2% of price |
| Rent | ZIP + bedroom comps, or HUD fair-market rent, never a rule of thumb if we can avoid it |
Those are conservative-but-normal DSCR-lender terms for a non-resident buyer in 2026. If you can get a better rate, your DSCR is better than ours. If you're paying cash, DSCR doesn't apply to you and you should look at cap rate instead.
House one: $150,000, 3 bed, rents for $1,300
| Loan (75%) | $112,500 |
|---|---|
| Principal + interest | $787 / month |
| Property tax (1.2%) | $150 / month |
| Insurance (0.5%) | $63 / month |
| PITIA | $1,000 / month |
| Rent | $1,300 / month |
| DSCR | 1.30 |
Clears the rule. $300 a month of room before the house starts costing you money.
House two: $220,000, 3 bed, rents for $1,650
| Loan (75%) | $165,000 |
|---|---|
| Principal + interest | $1,154 / month |
| Property tax (1.2%) | $220 / month |
| Insurance (0.5%) | $92 / month |
| PITIA | $1,466 / month |
| Rent | $1,650 / month |
| DSCR | 1.13 |
Nicer house, more rent, and we walk away. At 1.13 one vacant month or one furnace wipes out the year.
Why 1.20 and not 1.00
Two reasons, one about the lender and one about us.
The lender: most DSCR lenders we've talked to will lend down to a 1.00 ratio, some lower, but the rate and the down payment get worse as the ratio drops. Around 1.20 to 1.25 is where the pricing is usually normal. Below that you're paying for the privilege of a thin deal.
Us: the DSCR on a listing is computed with the house full and nothing broken. Real life has a vacant month between tenants, a water heater, a roof eventually. At 1.20, a $1,300 rent has about $215 a month of cushion, roughly $2,600 a year, which is one vacant month plus a repair. At 1.00 there is no cushion at all, and at 0.90 you are subsidizing a tenant's housing from Tel Aviv. We've seen people do it. We won't.
What moves the number
Price is the lever you control. On house two, an offer at $195,000 instead of $220,000 takes PITIA to about $1,300 and the DSCR to 1.27. That is the whole reason we sort by DSCR and negotiate on price instead of falling in love with the kitchen.
Rent is the lever you can't control, and it's where most bad underwriting hides. Somebody quotes you $1,850 for a house that will actually lease at $1,650 and every ratio looks great until the first month. We write about how we estimate rent, and where our estimates are weak, in the next post.
Run your own
Every listing page on this site has an Analyze button that opens our analyzer with the price, our rent estimate and the assessor's tax bill pre-filled. Change the rate to what your lender quoted you, change the rent to what a property manager told you, and see if it still clears 1.20. If it doesn't, keep looking. There are 6,500 more.
Triad Global
Run the same underwriting we run before we buy — rent comps, DSCR, and price per square foot against the ZIP.
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Written by Triad Global
Triad Global, LLC is an Indianapolis rental-property owner-operator run by a small partner team. We buy, hold and manage single-family and small multifamily rentals ourselves, and we built the free tools below because we needed them for our own underwriting.
