What Is It?

A ratio that compares the property's yearly net operating income (NOI) to its yearly debt service - the total principal and interest payments on the loan.

The debt coverage ratio, sometimes also called the debt service coverage ratio, is often used by lenders to determine loan eligibility.

A debt coverage ratio below 1 indicates that there is not enough cash flow to cover the debt service, and may result in a loan denial.

 

How Is It Calculated?

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