Debt Coverage Ratio (DCR)

Debt coverage ratio is the real estate ratio between the annual net operating income (NOI) and annual debt service (ADS) of the particular property. ADS is the total of 12 monthly mortgage payments. If NOI and ADS are the same amounts, DCR equals 1.0. This however would not be enough for a mortgage lender, who always requires some margin of safety and therefore DCR must always be higher than 1.0 (usually at least 1.20).

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