LESSON 3

DSCR: Can Your Property Pay Its Bills?

DSCR = Net Operating Income ÷ Annual Debt Service

If your NOI is $100K and your annual loan payments are $80K, your DSCR is 1.25. The property earns 25% more than it needs to pay the debt.

The Survival Math:

DSCR 1.20 Can absorb 17% income drop
DSCR 1.35 Can absorb 26% income drop

Critical Insight:

A minimum DSCR of 1.20 means you have almost no room for vacancies, repairs, or rent collection problems.

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