A ratio that is a measure of the cash flow available to pay the debt obligation. DSCR is calculated by dividing the net operating income by the total debt service. A DSCR of 1.0 means that there is enough net operating income to cover 100% of the debt service. Ideally, the ratio is 1.25 or higher. An apartment with a DSCR too close to 1.0 is vulnerable, and a minor decline in cash flow would result in the inability to service (i.e. pay) the debt. For example, a 200-unit apartment community with an annual debt service of $581,090 and a NOI of $960,029 has a DSCR of 1.65.
« Back to Glossary Index
« Back to Glossary Index