The ratio between a property's net operating income ("NOI") and its annual debt service. DSCR is often used as an underwriting constraint for commercial real estate loans.
The formula is: DSCR = NOI / Annual Debt Service. For example, a property generates $20,000 of gross rent and requires $5,000 of operating expenses per year, resulting in an NOI of $15,000. If the annual debt service for the property's mortgage is $10,000, the property's DSCR is $15,000 / $10,000 or 1.5. So, if a bank weren't willing to make a loan with a DSCR below 1.5, the largest loan they'd be willing to make would call for annual debt service in the amount of $10,000.
DSCR is one of several loan constraints available within Assess; all of them can be checked at the same time, and the prevailing loan amount, which will be factored into the model, will be the most conservative of the four.
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