DSCR
Real EstateDefinition
Debt Service Coverage Ratio. The cash flow available to cover loan payments, expressed as a multiple. The bedrock metric of commercial real estate lending. DSCR ≥ 1.25 is the standard minimum; below 1.0 means the property doesn't generate enough cash to cover the debt service.
Formula
DSCR = Net operating income / Annual debt service
Example
A property generates $120K NOI annually. The mortgage payment is $80K/yr. DSCR = 120/80 = 1.50 — strong. If rents fell 30% to $84K NOI, DSCR drops to 1.05 → loan covenant likely breached.