Finance Definition
Debt-Service Coverage Ratio (DSCR)
🏠 Real Estate
intermediate

Quick Definition

Debt-Service Coverage Ratio (DSCR) is a financial metric used to determine a borrower's ability to cover debt obligations with its operating income.

Formula

DSCR = Net Operating Income / Total Debt Service

Examples

  • 1A real estate company with an annual net operating income of $500,000 and annual debt service of $300,000 has a DSCR of 1.67, indicating it earns enough to cover its debt payments 1.67 times.
  • 2A small business applies for a loan and calculates its DSCR to show the bank it can comfortably pay the interest and principal on the proposed loan.
  • 3An investor evaluates the DSCR of a rental property to ensure the income generated is sufficient to cover the mortgage and other related debts.

Tags

DSCRdebt managementloan assessmentreal estate investingfinancial ratios
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Quick Info
Category:Real Estate
Difficulty:intermediate
Last Updated:6/18/2025