Debt Coverage Ratio [0530]

A property has net operating income of $10,000. The total annual payment on the mortgage is $9,000, which consists of $8,000 in interest and $1,000 in principal. What is the debt coverage ratio?

DCR = NOI ÷ Annual Debt Service

DCR = $10,000 ÷ $9,000 = 1.11

The interest, principal, and interest are not applicable in a DCR problem unless needed to calculate the annual debt service.