Tools and Tips for Real Estate Investors

How to Calculate Debt Coverage Ratio

Debt Coverage Ratio (DCR), also known as the Debt Service Coverage Ratio (DSCR), compares an investment property’s Net Operating Income (NOI) with its debt service.

Lenders use this ratio to calculate whether or not you will be able to generate enough income to pay the debt. Most commercial lenders require a Debt Coverage of 1.15-1.35 times the Net Operating Income (NOI) divided by the annual debt service.