Real Estate Math
A Wyoming investor purchases a $500,000 property with a 30% down payment. What is the debt coverage ratio if NOI is $42,000 and annual debt service is $28,000?
A1.0
B1.2
C1.5✓ Correct
D2.0
Explanation
Debt Coverage Ratio (DCR) = NOI / Annual Debt Service = $42,000 / $28,000 = 1.5. A DCR of 1.5 means NOI is 150% of the debt payments—generally considered favorable by lenders. Most commercial lenders require a minimum DCR of 1.25.
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