Debt Service Ratio

With most mortgage loans, the debt service refers to the

Also called the "debt coverage ratio," the DSR is the a measurement of a property's ability to handle a loan debt. The DSR is the projected debt service payments divided by the after-tax net operating income. Commercial lenders often impose minimum DSR restrictions of 1.10 to 1.35. The most common DSR is 1.2, which means that lenders require the property to produce net operating income that is at least 120% higher than the projected debt service payments. For more information, see the "Real Estate Investment Analysis Tools" article in the "Real Estate Investing" section.

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