What DSCR measures
DSCR is the cash flow test. A property with $1,250,000 of NOI and $1,000,000 of annual debt service has a 1.25x DSCR: it earns 25% more than it owes. At exactly 1.0x every dollar of NOI goes to the lender, and below 1.0x the sponsor is funding the shortfall.
Permanent lenders set minimum DSCRs for stabilized properties. Bridge lenders often accept a lower or even negative in-place DSCR when the business plan and an interest reserve carry the property to stabilization.
How to read the result
The ratio depends on how debt service is calculated. Interest-only payments produce a higher DSCR than amortizing payments on the same loan, and floating-rate loans change DSCR as the index moves. Lenders sometimes underwrite to a stressed rate or an amortizing constant even when the loan is interest-only.
NOI matters as much as debt service. Use a normalized figure that reflects real vacancy, management, reserves, and taxes rather than a trailing number inflated by one-time items.
Limitations
DSCR is a snapshot. It says nothing about the loan balance relative to value or about what happens at maturity. Pair it with LTV and debt yield, and run it under a higher interest rate to see how much room the deal really has.
The result is an arithmetic output from the numbers you enter. It is not a quote, a term, or an underwriting decision, and H Equities does not see or store what you type.