Key Takeaways
- DSCR (NOI / Debt Service) measures income cushion above debt payments; lenders typically require 1.20–1.30× minimum.
- LTV (Loan / Value) measures leverage; at 75% LTV, a 25% value decline eliminates all equity.
- Debt yield (NOI / Loan Amount) is independent of interest rates and property values, making it a more conservative risk measure.
- Breakeven occupancy reveals how much vacancy a property can absorb before requiring owner capital injection.
- Risk metrics must be evaluated in context: the same breakeven occupancy may be safe for multifamily (93% typical occupancy) but dangerous for office (85% typical).
This track contains subscriber-only lessons
Explore free tracks in this area of study, or subscribe for full access.
Browse available tracks"Monte Carlo, Sensitivity Analysis & Leverage Risk" is a Pro track
Upgrade to access all lessons in this track and the entire curriculum.
Test Your Knowledge
1.A property has $600,000 NOI and $480,000 annual debt service. What is the DSCR?
2.Why has debt yield gained prominence as a risk metric since the Global Financial Crisis?
3.A property has $1M gross potential income, $400K operating expenses, and $350K debt service. What is the breakeven occupancy?
4.At 75% LTV, what percentage decline in property value would eliminate all equity?