Posted by Ed Garcia on December 30, 2000 at 22:24:02:
You sound like you have a good handle on what you are doing. In reference to purchasing commercial properties, financials are definitely a consideration, however most lenders will view the buyer as a secondary source of repayment. They will expect the deal to have a 1.20 to 1.30 debt coverage ratio.
Definition of Debt Coverage Ratio (DCR). From A Glossary Of Common Term Used In Loans And Lending.
A ratio used in underwriting loans for income producing property which is created by
dividing net operating income by total debt service. Ratios of at least 1.10 are generally required with ratios of 1.20 and higher considered the norm.
What we’re saying here is, if all the cost including the loan, ads up to $1000 a month in out go, I want the property to bring in $1200 to $1300 which is 20 to 30% more than is going out. Basically the property is paying for it’s self, plus. Isn’t that why we call it income producing property? LOL
David, I’d like to wish you and your family a Happy New Year,