PITIA stands for principal, interest, taxes, insurance and association dues. Add them up and you have the full monthly payment on a financed rental. A DSCR rental loan divides the rent by that number. Get PITIA right and the ratio is honest. Get it wrong and the deal you approved on paper is not the deal you own.
PITI is the same list without the A. On a house with no association, the two are the same number. On a condo, a townhome or a planned community, the dues belong in the math from the first pass.
The five numbers
| Letter | What it is | Where the real number comes from |
|---|---|---|
| P - Principal | The part of each payment that pays the loan down | The loan amount and the amortization; zero on an interest-only payment |
| I - Interest | The cost of the money | The loan amount and the rate on your term sheet |
| T - Taxes | Property taxes, as a monthly figure | The county's rate applied to what the property will be assessed at after you buy it |
| I - Insurance | The landlord policy, plus flood or wind where required | A written quote on this property, not last year's premium or a rule of thumb |
| A - Association dues | HOA or condo fees, and any known special assessment | The association's current statement |
Principal and interest get most of the attention because the rate is the number investors shop. But P and I are the easy lines: once the loan and the rate are set, they are arithmetic. T, I and A are the lines that come from outside the loan, and they are the ones that surprise.
One worked example
Every figure below is a hypothetical illustration, not a quote, a rate or a promise of terms. It is here to show the mechanics.
A single-family rental leases for $2,400 a month. The loan is $250,000. Assume, as your own assumption, a 7.5% rate on a 30-year amortization. Principal and interest come to about $1,748 a month. That number does not change anywhere in this example.
- Built on the seller's numbers. The listing shows a $2,400 annual tax bill ($200 a month) and the seller pays $2,100 a year for insurance ($175). PITIA is about $2,123. DSCR is 2,400 / 2,123 = 1.13. It looks comfortable.
- Taxes on the price you are paying. The seller has owned it for years. Reassessed at your purchase price, the bill is closer to $4,800 a year ($400). PITIA is about $2,323. DSCR is 1.03.
- A real insurance quote. The written quote on a landlord policy comes back at $3,600 a year ($300). PITIA is about $2,448. DSCR is 0.98.
Same house, same rent, same loan, same rate. The ratio fell from 1.13 to 0.98 without the lender changing a thing. Two lines from outside the loan did all of it. In this example, every $24 a month of cost is about one point of DSCR.
The rate is not usually what breaks a rental. Taxes and insurance are. Put the real figures in the DSCR Calculator before you write the offer, and watch the ratio move line by line.
Taxes: price them on your purchase, not the seller's bill
A property tax bill reflects the owner who has it now. Long-held properties often carry low assessments, and homeowner exemptions and caps usually end when the property sells to an investor. In many states the assessment moves toward the sale price after a transfer. The bill in the listing is where the estimate starts, not where it ends.
Texas is the clearest case. There is no state income tax, but property taxes are among the highest in the country, and on a Texas DSCR loan the tax line is often the one that decides the file.
Insurance: get the quote early
Insurance is the line that moves most from one year to the next. Premiums vary by block, by the age of the roof, by distance to the coast and by flood zone, and a landlord policy costs more than the owner-occupant policy the seller may have carried. In coastal markets a separate wind or flood policy can be required on top.
Florida is the example everyone knows: on a Florida DSCR loan the insurance quote is the swing line in the whole payment. A file with a real, current quote reads faster and prices truer than one built on a guess.
Association dues: the quiet A
Dues are easy to leave out because they are paid to someone other than the lender. They still come out of the rent every month. A $300 HOA on the example above takes the ratio from 0.98 to about 0.87. Ask for the current statement, and ask whether a special assessment has been voted or is being discussed.
What PITIA leaves out
PITIA is the payment, not the full cost of owning a rental. Vacancy, repairs, capital items, management, utilities you pay as the landlord: none of them are in it. That is why a ratio at exactly 1.0 is break-even only on paper. For the cash-flow picture, budget those on top. For the loan, PITIA is the number that matters.
If the ratio comes in under 1.0, it is a reading at one set of assumptions, not a verdict. DSCR Below 1.0 walks through the dials that move it: the loan size, the payment structure, the rent evidence and the cost lines above.
Questions investors ask about PITIA
What does PITIA stand for?
Principal, interest, taxes, insurance and association dues. It is the full monthly cost of carrying a financed property, and it is the payment a DSCR rental loan measures the rent against.
What is the difference between PITI and PITIA?
PITIA adds association dues, such as HOA or condo fees, to PITI. On a property with no association the two are the same number. On a condo or a planned community, leaving the dues out overstates the cash flow.
How is DSCR calculated from PITIA?
Monthly rent divided by monthly PITIA. At 1.0 the rent exactly covers the payment. Above 1.0 the property carries itself with room to spare; below 1.0 there is a shortfall at those assumptions.
Should I use the seller's property tax bill?
Only as a starting point. In many states the assessment resets after a sale, and a seller's exemptions or caps usually do not carry over to an investor buyer. Estimate the tax on the price you are paying, not on what the seller has been paying.
Does 1st Private Capital publish a minimum DSCR?
No. The ratio is read with the property, the equity and the rent evidence. Price a Deal returns the program, the rate and the maximum loan on your own numbers.
Have a rental in mind? Enter the rent, taxes, insurance and any HOA, and see the program, the rate and the maximum loan in a few minutes. Price a Deal. DSCR rental loans are offered nationwide; see where we lend.
This article is provided for general informational purposes only. It is not a commitment to lend or investment, legal, tax, or financial advice. All figures, rates, and scenarios above are hypothetical illustrations, not a loan quote, rate representation, or promise of available terms. Property tax and insurance practices vary by state, county and property. Loans are for business purposes only. Actual loan terms, pricing, and transaction results vary and are subject to underwriting, documentation, and applicable law.