DSCR (Debt Service Coverage Ratio)

Category: finance

A measurement of a property’s available cash flow to pay current debt obligations.

DSCR is the "lender’s safety net." Calculated by dividing NOI by the annual mortgage payment. A DSCR of 1.0 means the property breaks exactly even. Lenders typically require a minimum DSCR of 1.20 to 1.25 to approve a commercial loan, ensuring a 20-25% cash cushion.

Common Examples

  • The bank rejected the refinancing application because the property’s DSCR fell below the required 1.25 threshold.
  • We must increase the rental rates to boost our NOI and restore a healthy DSCR before approaching lenders for the expansion capital.

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