InvestingAll terms starting with D
DSCR (Debt Service Coverage Ratio)
Also called: debt service coverage ratio
Net operating income divided by annual debt service: how many times the property covers its own loan payment.
A DSCR of 1.0 means the property exactly covers its debt service, with nothing spare. Lenders on investment loans generally want a cushion above that.
The ratio is only as reliable as the NOI feeding it, so vacancy and management assumptions matter as much as the rent figure.
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Related terms
- NOI (Net Operating Income)Income after operating expenses but before debt service, taxes on income, and capital expenditures.
- DSCR loanAn investment-property loan qualified on the property’s rental income rather than the borrower’s personal income.
- Cash flowWhat remains each month after rent has covered operating expenses and debt service.
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