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I've attached a cleanup tag - this article needs some major help. Among the issues:
Unencyclopedic tone. It rambles and is often written in the second person.
Use of examples sounds like tutorial rather than explanation. In general examples should be very limited here.
Very US-centric, and does not explain its assumptions and methods
Written before the 2008-2009 financial crisis, so many of the claims about uses and standards are obsolete, not just unreferenced
Seems to be incorrect in a number of ways, confuses cash flow with income. Debt service coverage ratio is a measure by the bank of whether (by their standards - not by accounting or financial standards) the property will generate enough cash flow to pay the loan. Income considers things like depreciation, whereas the bank does not care about that. However, the bank adds various fudge factors such as maintenance and repair, vacancy factors, etc., that are standard numbers and usually not based on actual performance. A good article would explain the bank methodology here, and how it varies from market to market.
Wrong. Remember interest is NOT an operating expense and DSCR = Net OPERATING Income/Debt Service. Interest expense must be added back to net income because we are trying to determine the amount of income available for interest and principal. Why would you deduct interest from the amount of income supposedly available to pay that interest???? —Preceding
unsigned comment added by
69.140.28.58 (
talk)
03:43, 27 March 2011 (UTC)reply