What is the most important number in the commercial marketplace?
The Debt to Service Coverage Ratio (DSCR, DSC, DCR or DSR). This number is calculated by taking the Net Operating Income (NOI) and dividing it by the Total Debt Service (the mortgage payments). Or, DSCR = NOI/Mortgage Payments. The ensuing number should be 1.2 or higher. NOTE: Use at least a 35% expense ratio against the Gross income to arrive at the NOI. If the expenses are higher, use the higher number.
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