Nadlan Capital Group – Financing For Foreign Investors in the US Market

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Net Operating Income (NOI)

NOI represents the total income generated by the property minus operating expenses. The formula for NOI is: NOI=Total Income−Operating ExpensesNOI=Total Income−Operating Expenses

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Total income includes rental income, fees, and other revenue generated by the property.

Operating expenses include property management fees, maintenance costs, property taxes, insurance, and other operational costs.

Debt Service

  • Debt service refers to the total amount of debt-related payments, primarily mortgage payments. It includes both principal and interest payments.                   
  • Debt Service = Principal Repayment + Interest Payment. In most cases, the lenders will consider the entire PITIA = Principal, Interest, Taxes, Insurance, and Association.

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Calculation of the DSCR

  • Once you have the NOI and Debt Service, you can use the DSCR formula to determine the ratio.                                
  • A DSCR greater than 1 indicates that the property’s income is sufficient to cover its debt obligations.                  
  • A DSCR less than 1 suggests that the property’s income is not enough to cover debt payments.