Debt service coverage ratio (DSCR) measures whether a property earns enough to pay its mortgage. You divide annual net operating income (NOI) by annual debt service — the principal and interest you pay on the loan over a year. A property with $30,000 of NOI and $24,000 of loan payments has a DSCR of 1.25.
A DSCR above 1.0 means income more than covers the debt; below 1.0 means the property doesn’t cover its own loan and you’d fund the gap. Lenders lean on it heavily when sizing investment-property loans and commonly look for a cushion above 1.0. It’s a lender’s-eye view of the same numbers behind cash flow — read the two together, and only trust the ratio if the NOI beneath it comes from clean books.