Finance
A Texas real estate investor uses the debt coverage ratio (DCR) to evaluate a purchase. A DCR of 1.0 means:
AThe property generates twice the income needed to service debt
BThe property's NOI exactly covers the annual debt service with nothing left over✓ Correct
CThe loan is at 100% LTV
DThe investor needs no down payment
Explanation
DCR (or DSCR) = NOI ÷ Annual Debt Service. A DCR of 1.0 means NOI exactly equals debt service — there is no excess income. Lenders typically require a DCR of 1.2–1.35 to ensure there is a buffer for unexpected expenses.
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