Glossary of Terms

Debt Service Coverage Ratio (DSCR) 2015-09-16 08:00:00

Debt Service Coverage Ratio (DSCR)

In the context of commercial real estate, a measure of the cash flow available to pay current debt obligations. It is calculated as the annual net operating income (NOI) from a property divided by annual cost of total debt service.

For example, if a property generates an NOI of $120,000 and annual debt service payments are $100,000, the DSCR would be 1.20 ($120,000 / $100,000). A DSCR below 1.0 means that there are insufficient funds generated by the property to cover its debt obligations.

 


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