How is DSCR (Debt Service Coverage Ratio) Calculated?
The DSCR is basic algebra containing two knowns: Annual Net Operating Income and Annual Loan Payments, and one unknown – the DSCR.
NOI - Annual Net Operating Income (Gross Income less all expenses)
Annual Debt Service - Annual Loan Payments (principal and Interest)
Annual Net Operating Income / Annual Loan Payments = DSCR
Example: Annual Net Operating Income: $136,000 /annual debt Service $96,000 = DSCR 1.42
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