DSCR can have applications in business, government, and personal finances. Like DSCR loans, this ratio is often used in real estate to determine whether an investment property’s cash flow can cover its mortgage payments.
The higher the DSCR, the better the ratio. A DSCR above 1 means that an investment property has positive cash flow and enough net operating income to cover its debts. As a general rule, anything above 1.25 is considered a good DSCR.