Coverage

DSCR & debt yield

Does the income cover the debt, and by how much?

Builds net operating income from the rent roll down — gross potential rent, vacancy, operating expenses, reserves — then tests coverage, debt yield and break-even occupancy against it.

Every default here is an illustrative figure chosen to be plausible. Nothing on this page is a rate sheet, a quote or an offer, and no licence or NMLS number exists to attach to it.

Income

Expense

The debt

Net operating income——
DSCR——
Debt yield——
Break-even occupancy—Where income exactly covers opex and debt

From gross potential rent to coverage

Illustrative

Every step down is an underwriting adjustment. The gap between the last two bars is your coverage — and it is the only part of this chart a lender is really looking at.

Income waterfallA waterfall from gross potential rent down to net operating income and debt service.

The build-up, line by line

LineAnnualPer unit% of GPR

Coverage headroom

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Assumptions on this page

  • The management fee is applied to effective gross income, which is gross potential rent less vacancy plus other income.
  • Replacement reserves are deducted from net operating income before coverage is tested, which is standard on multifamily and is why an owner’s NOI and an underwriter’s NOI differ.
  • Break-even occupancy is computed against gross potential rent, so it is comparable across properties of different sizes.
  • Everything here is illustrative arithmetic. No figure on this page is a quote or an offer.

Want a person to look at the real numbers?

Demonstration

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