Real Estate Math
An Oklahoma investor's property has cash flow before debt service of $45,000 and annual debt service of $32,400. What is the debt coverage ratio (DCR)?
A0.72
B1.39✓ Correct
C1.45
D0.89
Explanation
DCR = NOI ÷ Annual Debt Service. $45,000 ÷ $32,400 = 1.389 ≈ 1.39. A DCR above 1.0 means the property generates enough income to cover debt service. Lenders typically require a minimum DCR of 1.2 to 1.25.
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