Debt Service Coverage Ratio ("DSCR")
NOI ÷ (Mortgage + Taxes + Insurance)
A DSCR of 1.0 means the property generates exactly enough cash flow to cover the cost of servicing the property. Let's say you own a rental property that generates $30,000 in NOI and the monthly mortgage taxes and insurance are $2,000 or $24,000 annually. That means the property has a DSCR of 1.25. This is a healthy margin of cash flow to cover any temporary spikes in vacancy or unexpected maintenance requirements.