DSCR (Debt Service Coverage Ratio)
Net operating income divided by annual debt service. A DSCR of 1.25 means the property’s income is 125% of its loan payments; below 1.0, the property does not cover its own debt. Lenders use DSCR to size loans, and DSCR loan programs qualify borrowers on property income rather than personal income.
Related terms
NOI (Net Operating Income)
A property’s income minus its operating expenses, calculated before loan payments, income taxes, and capital expenditures. NOI isolates how the property itself performs, independent of how it is financed or owned. It is the numerator in cap rate and DSCR, which makes it the backbone of most income-property analysis.
Cash Flow
The money left over after all of a property’s bills are paid from its income — operating expenses, loan payments, and reserves. Positive cash flow means the property pays for itself with margin; negative cash flow means the owner feeds it. Cash flow is the recurring return, distinct from appreciation and tax effects.
Hard Money Loan
A short-term loan from a private lending company, secured by the property and underwritten mainly on the asset’s value — often its ARV — rather than the borrower’s income. Rates and fees run well above conventional mortgages, but closings are fast and condition requirements are loose, which is why flippers and BRRRR investors use them as bridge financing.