Debt Service Coverage Ratio

The Debt Service Coverage Ratio (DSCR) tells you the relationship between the Net Operating Income (NOI) and the amount necessary to service the debt on the property.

Debt Service Coverage Ratio = Net Operating Income / Debt Service

You have a 10-unit Apartment Building and your NOI is $47,500.

You have a $525,000 mortgage with monthly payments of $3150, which is an annual total of $37,800.

DSCR = NOI / Debt Service

DSCR = 47,500 / 37,800

DSCR = 1.2566

Your debt service coverage ratio is 1.2566, or 125.66%.

Also, this means that after you make the payment of the mortgage from the Net Operating Income, there will be $9,700 left.