Achieve Financial Freedom with Real Estate Loan DSCR
The Importance of DSCR in Real Estate Investing
DSCR is calculated by dividing the net operating income (NOI) of a property by its total debt service. For example, if a property generates $120,000 in NOI and the annual debt service is $100,000, the DSCR would be 1.2. This ratio suggests that the property generates 20% more income than is needed to cover its debt, which is generally considered a safe margin by lenders1.
Lenders typically require a DSCR of at least 1.2 to 1.3 for real estate loans, although this can vary based on the lender and property type. A higher DSCR not only improves the chances of loan approval but can also result in lower interest rates and better loan terms, ultimately enhancing the investor's cash flow and return on investment2.