Debt Coverage Ratio

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Debt Coverage Ratio (DCR) is the Net Operating Income (NOI) divided by Annual Debt Service.  Lenders generally specify a minimum DCR.  A DCR of 1.2 is a common requirement.

 

The debt coverage ratio indicates whether or not the property income will pay the mortgage.  If the ratio is less than 1.0, the owner will have to pay part (or all) of the loan out of pocket.

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