Investment Property – What is Debt Coverage Ratio

The right evaluation is critical in buying your next investment property. There are many different formulas and calculations that you can use to evaluate potential investment properties. Today we look at Debt Coverage Ratio (DCR)

Debt Coverage (Service) Ratio (DCR or DSR or DCSR): Calculates to see if the net cashflow will cover the cost of financing. Specifically, the Net Operating Income before financing (NOI) is divided by the cost of financing.

Lenders want to see at least 1.1 or 1.2 coverage. Meaning the cashflow after expenses is more than enough to make the mortgage payment. 

Contact Us

For more information on this calculation and analyzing investment properties, contact your local Ajax Mortgage Broker, Sean Stewart at 905-427-9596 or sean@seanastewart.com