Investing metrics
Debt-service coverage ratio (DSCR)
Debt-service coverage ratio divides net operating income by the annual debt service required during the same period.
Glossary
Investing metrics
What does DSCR mean?
Primary references on this page:
A ratio above 1.00 means the modeled NOI exceeds modeled debt service; below 1.00 means it does not. That interpretation is mathematical, not an approval threshold. Lenders can normalize NOI, include reserves, define debt service, stress rates, and require ratios differently by property and program.
How debt-service coverage ratio (dscr) works
Use supportable annual NOI and the full annual principal-and-interest obligation required by the analysis. Keep periods aligned. Stress vacancy, expenses, and variable-rate debt rather than presenting one base-case ratio as certain.
Formula: DSCR = annual NOI ÷ annual debt service
Worked example
Annual NOI of $140,000 divided by $100,000 annual debt service produces a 1.40 DSCR. If stressed NOI falls to $112,000, DSCR falls to 1.12 without any change in the loan payment.
Common mistakes and review checks
Treat the result or document as one input to a decision. Verify the current source document, definitions, dates, and transaction facts before relying on it.