Net operating income divided by annual debt service, used to estimate a property’s ability to cover loan payments.
What debt service coverage ratio means in practice
A DSCR above 1.0 means NOI exceeds debt service; below 1.0 means it does not. Lenders may calculate NOI and required coverage differently, so use their definitions when underwriting a loan.
Example
A property with $24,000 in NOI and $18,000 in annual debt service has a DSCR of about 1.33.
This glossary is educational and not legal, tax, lending, or accounting advice. Rules and terminology can vary by jurisdiction and professional context.