Real Estate Math
A Delaware investor buys a fourplex for $480,000 with 20% down. Annual NOI is $34,000. Annual debt service is $26,400. What is the debt service coverage ratio (DSCR)?
A1.29✓ Correct
B1.50
C0.77
D1.10
Explanation
DSCR = NOI ÷ Annual Debt Service = $34,000 ÷ $26,400 = 1.288 ≈ 1.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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