Debt Service Coverage Ratio (DSCR)

A measure of a property's ability to cover its debt obligations. DSCR = NOI / Annual Debt Service. A DSCR of 1.25 means the property generates 25% more income than needed to pay the mortgage. Lenders typically require DSCR of 1.20-1.25 minimum.

Key Points

Understanding debt service coverage ratio (dscr) is essential for evaluating real estate investments
This metric helps investors compare opportunities objectively
Our Free Snapshot tool automatically calculates relevant metrics for any property

Related Terms

Net Operating Income (NOI)

The annual income generated by an investment property after deducting all operating expenses but before debt service and taxes. NOI = Gross Income - Operating Expenses. It does not include mortgage payments, capital expenditures, or depreciation.

Loan-to-Value (LTV)

The ratio of the loan amount to the appraised value of the property. LTV = Loan Amount / Property Value × 100. A 75% LTV means you're borrowing 75% of the property's value and putting 25% down.

Cash-on-Cash Return

A metric that measures the annual pre-tax cash flow relative to the total cash invested in a property. Unlike cap rate, it accounts for financing and shows your actual return on invested capital. Formula: CoC = Annual Cash Flow / Total Cash Invested × 100.