The debt service coverage ratio (DSCR) measures a property's ability to cover its mortgage payments from operating income, serving as a critical underwriting metric for commercial lenders.
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Net operating income represents a property's total revenue minus all operating expenses, excluding debt service and capital expenditures, serving as the foundation for most real estate valuation methods.
Loan-to-value ratio compares the mortgage amount to the property's appraised value, serving as a primary measure of lending risk and a key determinant of loan terms.
Leverage in real estate involves using borrowed capital to increase the potential return on investment, amplifying both gains and losses relative to the investor's equity.
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