Just realized my last CRE deal was a total mess because I ignored the DSCR

I closed on a small multifamily in Denver 2 years ago and thought the numbers were solid. Last week I got the annual statement and my debt service coverage ratio was barely 1.1. That meant any vacancy would wreck me. Should have run the stress test before signing, not after. Anyone else find out the hard way that lenders check DSCR for a reason?

2 comments

2 Comments

walker.andrew6d ago

Wait, you mean lenders actually know what they're talking about when they set those ratios? That's way too much credit to give the guys who made us sign 47 pages of disclosures. Sounds like your stress test results came back as "financial panic attack.

brooke_walker6d ago

Read an article just last week about how investors get burned when they skip those stress tests on their DSCR. The article said most lenders actually calculate it at 1.25 minimum but property owners ignore it like it won't matter later. Your story is a perfect example of why that rule exists.