Debt-service coverage ratio (DSCR) is a property's net operating income divided by its debt service. A DSCR above 1.0 means the property covers its loan payments; below 1.0 means it does not, a common sign of a stressed commercial credit.
DSCR is one of the clearest measures of whether a property can carry its loan. A falling or sub-1.0 DSCR signals a credit headed for default or maturity stress — and drives how a buyer prices it.
Lenders often look for 1.20x or higher at origination; below 1.0 means the property's income does not cover debt service.
A low or sub-1.0 DSCR signals stress and a wider discount to balance, because the property does not currently support its debt.
No — a buyer prices the cash-flow shortfall into the bid; sub-1.0 credits are routinely sold.