If you plan on investing in commercial real estate, you’ll likely get financing from a bank or lender. The loan underwriting process differs greatly from a residential loan, including the metrics lenders use to determine if they’ll loan to you or not.
One of the most important metrics used when applying for a commercial loan is the debt service coverage ratio (DSCR). Let’s take a look at how to calculate debt service coverage ratio and why it’s an important part of investing in commercial real estate.
What is debt service coverage ratio in commercial real estate?
The debt service coverage ratio examines the borrower’s ability to repay the debt based on the property’s income and performance. Lenders use the DSCR to determine the maximum loan amount or whether the property can sustain the debt it is incurring. Read entire article in Fool.com
Debt coverage ratio or debt service coverage ratio is the primary benchmark that commercial lenders look at when considering a commercial real estate financing opportunity. To ask about any other real estate questions regarding financing a property contact us through the contact form on the right of the page or visit Liberty Realty Capital Group for more information.
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