Methodology
How the Rental Coverage Index is calculated.
Coverage is simply this: how much of a landlord's monthly mortgage payment the rent actually pays for. Everything below is how we measure that, and where each number comes from.
What is the Rental Coverage Index?
It is a quarterly measure of how far a typical rent goes toward a typical investor mortgage payment in each of 100 U.S. metros. Coverage is rent divided by the full payment — principal, interest, property tax and homeowners insurance — so a reading of 1.0 means rent exactly covers it. Unlike other rent-to-payment reports, it comes from a licensed broker that underwrites these loans, counts the whole payment rather than principal and interest alone, and archives each quarter as published.
One line, then every term in it.
DSCR = typical asking rent ÷ (P&I + property tax + homeowners insurance)
Nothing in that line is our own estimate of the market. Rent, home value and the base mortgage rate are read straight out of published series; property tax and insurance are derived from government and regulator data. Each one below names the exact file we pull and what we do with it.
- Rent
- Zillow Observed Rent Index (ZORI), all homes plus multifamily, smoothed, seasonally adjusted, metro (Metro_zori_uc_sfrcondomfr_sm_sa_month.csv, monthly through 2026-07)Zillow's typical asking rent for the metro; the quarter value is the mean of its three monthly values.
- Home value
- Zillow Home Value Index (ZHVI), all homes, mid-tier (33rd–67th percentile), smoothed, seasonally adjusted, metro (Metro_zhvi_uc_sfrcondo_tier_0.33_0.67_sm_sa_month.csv, monthly through 2026-07)Typical home value for the metro; quarter value = mean of the three monthly values.
- Base mortgage rate
- Freddie Mac Primary Mortgage Market Survey 30-year fixed rate, via FRED series MORTGAGE30US (weekly, 1971-04-02 to present)Quarter value = mean of the weekly rates in the quarter.
- Property tax
- U.S. Census Bureau American Community Survey 5-year estimates, tables B25103 (median real estate taxes paid) and B25077 (median home value), by county; housing-unit weights from B25001. County-to-metro mapping from the Census 2023 CBSA delineation file (list1_2023.xlsx)Effective property-tax rate per county, aggregated to the metro weighted by housing units (ACS B25001), applied to ZHVI. Suppressed counties fall back to the state median rate (listed on the archive page).
- Homeowners insurance
- NAIC Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner's Insurance Report: Data for 2023 (published July 2026) — state average HO-3 premium, divided by state median home value (ACS 5-year B25077)A state-level rate applied to the metro's ZHVI. No free metro-level premium series exists; this is a disclosed approximation.
What we assume, and why.
Five inputs are not published by anyone — they are underwriting choices we made and are stating openly, so that anyone who disagrees can substitute their own and rerun the same arithmetic.
- Investor rate spread 100 bps
- Investor (DSCR) pricing typically runs about 0.75 to 1.00 percentage points above owner-occupied conforming pricing; the index uses 1.00. Public lender guidance puts investor pricing roughly 50–100 bps above owner-occupied conforming, with DSCR programs another ~25 bps higher (sources on the methodology page); this is what we underwrite with, not a measured market series. Actual DSCR pricing varies with the borrower, property, loan-to-value and scenario. Reviewed each quarter by Esther Buede (NMLS #2003644).
- Down payment 25%
- A typical DSCR scenario; the loan is 75% of typical value. Some DSCR programs allow a higher loan-to-value.
- Loan term 30 years
- Fixed-rate, fully amortizing.
- HOA dues Excluded
- Excluded from the metro-wide index because HOA dues cannot be measured consistently across a metro. In an actual DSCR underwrite, HOA dues are part of the monthly housing payment — add yours in the DSCR calculator.
- Vacancy allowance Excluded
- DSCR lenders qualify on gross rental income with no separate vacancy haircut; a lender typically reviews the market rent on the appraisal and, for a tenant-occupied property, the lease, and uses the lower of the two. The index uses Zillow's typical asking rent.
The investor spread is the one judgement call that moves every metro at once, so here is the published lender guidance it rests on: The Mortgage Reports and LendingTree both put investment-property pricing roughly half a point to a full point above owner-occupied, and Host Financial prices DSCR programs about another quarter point above conventional investor loans. Those are the shape of the market, not a measurement of it, which is why the number is reviewed every quarter rather than fixed forever.
Reviewed by Esther Buede, NMLS #2003644, Mortgage Broker & Owner of Choice Home Mortgage
Restatements, revisions and cutoffs.
Zillow revises the history of both series and periodically changes methodology; we restate every trailing quarter from a fresh pull each edition and stamp the vintage. Prior editions are archived as published, never edited.
Freddie Mac changed PMMS methodology on November 17, 2022, moving from a survey of lenders to a calculation based on loan applications submitted to Freddie Mac; rates before and after that date are not strictly comparable.
A quarter is computed from the Zillow release covering its final month, pulled at least 7 days after release. Each edition stamps its source vintages.
Data provided by Zillow. Rate data: Freddie Mac via FRED. Tax and housing-unit data: U.S. Census Bureau ACS. Insurance: NAIC.
Metros are compared; no individual property, lender, or person is ranked or named.
A reading under 1.00 does not mean a property cannot be financed. Some DSCR programs allow ratios below 1.00, and no-ratio options exist when rent does not cover the payment. Program availability varies; this index is not a loan offer.
Choice Home Mortgage originates investor loans. The index uses public data and disclosed in-house assumptions; it is not a statistical survey and not a rate or payment offer (Reg Z).
How this differs from other reports.
Other rent-to-payment reports exist (e.g. BiggerPockets' Rent-to-Payment, Home Abroad). This index differs in three ways: it is published by a licensed broker that underwrites DSCR loans, it uses the full payment (P&I + tax + insurance) not P&I alone, and it is a fixed 100-metro grid published on a fixed quarterly schedule with every prior edition preserved.
Methodology: common questions
Is the Rental Coverage Index a rate quote?
No. It is research built from public data and the disclosed assumptions on this page. It is not an offer, a quote, or a prediction of the rate or payment any particular borrower would receive. Pricing depends on the property, the borrower and the program on the day you lock. Call us for an actual quote.
Why does the index assume 25% down?
Twenty-five percent is the common minimum on DSCR investor programs, so it is the assumption most likely to match a real deal. It also means the index compares metros on identical terms: the only thing moving coverage between two metros is the local rent, price, tax and insurance, never a different down payment.
Why are HOA dues left out?
HOA dues are not observable at the metro level, so any figure would be a guess applied evenly to every metro — it would move all the readings without changing how they rank, while making the index look more precise than it is. Leaving the line out and saying so is more honest. The DSCR calculator lets you add your own.
Why publish quarterly instead of monthly?
The underlying series are smoothed and revised, and mortgage rates move week to week. A quarter is long enough that a change in coverage reflects the market rather than the noise in one month's release, and short enough to stay current. Every edition recomputes all trailing quarters, so the history is always on one method.
Can I download the data?
Yes. Each edition publishes the full metro table as a CSV alongside the write-up, with the source vintages stamped on it, and prior editions stay online exactly as they were first published. The first edition follows this methodology page.
Run your own numbers
The DSCR calculator uses the same math with your rent, price and rate.