DSCR = Net Operating Income (NOI) ÷ Total Debt Service
Net Operating Income = Operating Income – Operating Expenses
Total Debt Service = Principal Payments + Interest Payments
DSCR = Annual NOI ÷ Annual Debt Service
DSCR = Monthly NOI ÷ Monthly Debt Service
DSCR > 1.0 means income is greater than debt payments
DSCR = 1.0 means income equals debt payments
DSCR < 1.0 means income is less than debt payments
Example: DSCR = $120,000 ÷ $100,000 = 1.20
Formula: DSCR = Cash Available for Debt Service ÷ Debt Service
Use the same time period for both income and debt service
Include only recurring operating income
Exclude taxes, depreciation, and amortization from NOI
Include all required loan payments in debt service