DEBT GUIDE
How to Calculate DSCR
Debt service coverage ratio compares cash available for debt service with interest and scheduled principal.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Choose the correct numerator: property NOI, EBITDA or cash available for debt service according to the loan definition. Keep the period consistent.
Calculation framework
Divide annual cash available by annual interest plus scheduled principal. A 1.30x DSCR means cash flow is 30% above scheduled debt service.
Underwriting review
Test floating rates, amortization, interest-only periods and stabilization timing. An annual average can hide monthly covenant pressure.
How to use the result
Use DSCR to size debt and assess covenant headroom. Review it with debt yield, LTV, maturity risk and capital expenditure needs.