Property Valuation
A NH income property's debt service coverage ratio (DSCR) of 1.25 means:
AThe property generates 25% less income than its debt service
BNOI is 125% of the annual debt service — the property generates 25% more income than needed to service the debt✓ Correct
CThe loan-to-value ratio is 125%
DThe property has 25% vacancy
Explanation
DSCR = NOI / Annual Debt Service. A DSCR of 1.25 means the property's NOI is 125% of the debt service — it covers the mortgage payment with 25% remaining. Most commercial lenders require a minimum DSCR of 1.20-1.25.
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