Investor Cash Flow Loans (DCLR)/ Debt Service Coverage Ratio loans are loans designed for real estate investors that do not want to use their tax returns to qualify to buy investment property.
The debt service coverage ratio is the property’s annual net operating income (NOI) compared to its annual mortgage debt service (annual debt obligation for the property). The Investor Cash Flow Loans (DCLR) is typically used by lenders to qualify a borrower for a real estate investment loan because it determines the borrower’s ability to repay the loan, also known as the income coverage.
While it varies between lenders, typically anything above 1.2 is usually considered good, and anything above 1.5 is considered great. 1.0 means the investor is getting exactly the same amount of rent as their monthly payments. We calculate DSCR by dividing PITIA (monthly principal, interest, taxes, insurance and association dues) by the gross monthly rent.