Property Valuation
A South Carolina commercial appraiser calculating 'debt service coverage ratio' (DSCR) is measuring:
AThe ratio of debt to property value
BThe ratio of NOI to annual debt service—used by lenders to assess loan risk✓ Correct
CThe percentage of gross income needed for debt
DThe ratio of cap rate to interest rate
Explanation
DSCR = NOI ÷ Annual Debt Service. A DSCR of 1.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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