What the ratio is saying
- A result of 1.00x means the income covers the scheduled payments and nothing more.
- Below that, NOI alone does not cover the payment.
- Above it, there is room, and the room is not the same thing as cash you can distribute.
- Reserves, capital spending, and the sale still sit outside the ratio.
The free DSCR calculator answers one year from the NOI and the debt service you type, in your browser. The hold belongs to the full model.
Worked example
- On Cayuga Commons (Illustrative Case), year 1 NOI is $594,066.40 and year 1 debt service is $408,220.50.
- The engine's year 1 DSCR is 1.46x.
- The minimum over the 7-year hold is 1.46x.
- The verdict reads that minimum across the hold.
- The engine's own floor is 1.00x.
- A lender sets its own test, and may want more room than that.
- The loan on this case is $5,525,000 at 6.25%, 65% of the $8,500,000 price.
- Year 1 NOI
- $594,066.40
- Year 1 debt service
- $408,220.50
- Year 1 DSCR
- 1.46x
- Minimum DSCR
- 1.46x
- Project IRR
- 15.34%
- Equity multiple
- 2.4351x
- Verdict
- PURSUE
When the calculator is not enough
A single year cannot tell you if a later year is tighter, or if the sale pays the loan off. The full model runs every year of the hold, then applies the verdict rule: a computable IRR, minimum DSCR at or above 1.00x, and IRR at or above the hurdle.
Open the worked example and change the rate or the loan. The DSCR and the verdict move together, because they come from one run.