What is the DSCR?
How is it useful?
The ratio answers vital questions for lenders such as:
- Does this property generate enough cash flow to cover its debt obligations from operations?
- Can the property afford this loan?
- How much risk does this deal hold?
How do lenders calculate the DSCR?
DSCR = 1.64x
DSCR = $7,250,000 / $4,400,000
Net Operating Income = $7,250,000
Revenue = $8,500,000
Operating Expenses = $1,250,000
Total Debt Service = $4,400,000
Construction Loan = $1,800,000
Warehouse Acquisition = $2,600,000