Debt Service Coverage Ratio (DSCR) is a vital financial metric for multifamily real estate investors, particularly when assessing the ability of a property to cover its debt obligations. DSCR quantifies the property’s capacity to generate income sufficient to meet its debt service payments, including interest and principal repayments.



Debt Service Coverage Ratio (DSCR) is a vital financial metric for multifamily real estate investors, particularly when assessing the ability of a property to cover its debt obligations. DSCR quantifies the property’s capacity to generate income sufficient to meet its debt service payments, including interest and principal repayments.

Calculated by dividing the property’s net operating income (NOI) by its debt service (annual loan payments), a DSCR value greater than 1 indicates that the property generates enough income to cover its debt obligations. Multifamily investors often seek DSCR values above 1.25 to ensure a comfortable margin of safety, indicating a property’s ability to withstand unforeseen financial challenges.

Lenders use this ratio to assess the property’s creditworthiness and the borrower’s ability to service the debt. Investors utilize DSCR to ensure the property’s income is robust enough to support its financial obligations.