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What is Debt Service Coverage Ratio (DSCR)?

Debt Service Coverage Ratio (DSCR) is a financial metric used to measure whether a property generates enough income to cover its loan repayments.

How DSCR Is Calculated

  • DSCR = Net Operating Income ÷ Total Debt Obligations
  • Higher DSCR indicates stronger repayment ability
  • Used by lenders during loan evaluation
  • Common in commercial real estate financing

Why DSCR Matters to Investors and Lenders

  • Helps assess financial stability of a property
  • Influences loan approval and borrowing capacity
  • Measures property profitability and risk
  • Supports better investment decision-making

DSCR is an important indicator in real estate finance because it evaluates a property’s ability to meet debt obligations. A strong DSCR improves financing opportunities and investment confidence.

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