The ratio of net operating income to annual debt payments.
DSCR measures how comfortably a property's income covers its mortgage payments. Lenders use DSCR to evaluate loan applications, especially for investment properties and commercial real estate. A DSCR above 1.0 means the property generates enough income to cover its debt; below 1.0 means it operates at a loss after debt service.
DSCR = Net Operating Income ÷ Annual Debt ServiceDSCR equals NOI divided by annual mortgage payments (principal and interest).
A property generates $30,000 in annual NOI and has $24,000 in annual mortgage payments. DSCR = $30,000 ÷ $24,000 = 1.25. This means NOI covers debt service 1.25 times, leaving a 25% buffer.
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Annual rental income minus operating expenses, before mortgage payments.
The ratio of a property's loan amount to its appraised value or purchase price.
The net cash a rental property generates after all expenses including mortgage payments.
The percentage of gross rental income needed to cover all operating expenses and debt service.
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