What is the name of the ratio that analyzes debt in relation to income in commercial properties?

The debt service coverage ratio (DSCR) is a critical measure used in the analysis of commercial properties, as it assesses a property's ability to generate sufficient income to cover its debt obligations. This ratio is calculated by dividing the net operating income (NOI) of the property by the total debt service (which includes both principal and interest payments). A ratio greater than one indicates that the property generates more income than is required to service the debt, which is a positive sign for lenders and investors.

This metric is particularly important because it provides insight into the financial health of a property. A higher DSCR suggests lower risk for lenders, as it indicates that the property can comfortably cover its debt. Conversely, a lower DSCR might raise red flags about the property's ability to meet its financial obligations, potentially leading to refinancing challenges or a loan default.

Other choices, while related to financial metrics, serve different purposes. The loan-to-value ratio focuses on the relationship between the loan amount and the appraised value of the property, important for assessing collateral and security. The debt-to-income ratio typically applies to personal finances, analyzing an individual's total debt against their income. The capitalization rate reflects the return on investment based on property income but does not specifically measure debt coverage. Thus