This video breaks down in simplified terms the concept of DSCR and provides examples of how investors and banks use it in real estate.


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The term DSCR stands for “Debt Service Coverage Ratio.” It is a financial metric used to evaluate a property's ability to generate enough income to cover its debt payments and to assess the risk and feasibility of a real estate investment.

While it is one of the more obscure metrics, it’s definitely one that you should become familiar with if you’re going to be dealing with any commercial and nonowner occupied loans for your rental properties.

Here's how it works:

In order to calculate the DSCR, you'll need to divide the property's net operating income (NOI) by its total debt service (TDS).

The NOI is the property's income from rent and other sources, minus all of its operating expenses. Operating expenses do not include TDS and TDS is all principal and interest payments owed to a lender for that particular property.

When doing this calculation, you would typically calculate it on a monthly basis, but it comes out to the same ratio on an annual basis as well.

DISCLAIMER: please note that the information contained in this video is for educational and entertainment purposes only. You should always consult your own attorney and your own financial and tax advisors before making any legal or financial decisions. This video is not intended to and does not create any attorneyclient relationship between the content creator and the viewer. The views and opinions expressed in this video belong solely to the creator and do not reflect those of his law firm or any of his business partners.