Cap Rate and DSCR
NOI / value and NOI / annual debt service with common-practice bands.
Example
You enter
- Annual NOI ($) 84000
- Property value or purchase price ($) 1200000
- Annual debt service ($, optional for DSCR) 60000
You get
- Cap rate (%) 7%
- DSCR 1.4
Checked against published worked examples from: Standard CRE underwriting ratios (public).
Details, formula, and sources
ScopeCRE underwriting ratio cross-check.
Formula or tableCap rate = NOI / property_value (as a percent). DSCR = NOI / annual_debt_service. NOI is gross income minus operating expenses (excluding debt service, depreciation, income tax). Bands are common-practice; not agency-defined.
Source and editionStandard CRE underwriting ratios. Universal in commercial-real-estate practice.
Free accessPublic reference; covered in every introductory CRE finance text.
What governsEstimate. Lender governs final underwriting and rate / fee disclosure. Appraiser governs the appraised value. State law and the agency's program guidelines may impose stricter limits than the published thresholds.
API field namesnoi_annual, property_value, annual_debt_service, cap_rate_percent, dscr
- NOI scope gross income minus operating expenses; EXCLUDES debt service, depreciation, income taxconvention
- Cap-rate bands <4 prime, 4-6 strong, 6-8 typical, >8 higher-riskcommon-practice approximation
- DSCR bands <1.0 negative, 1.0-1.25 thin, 1.25-1.5 agency-acceptable, >1.5 strongFNMA / Freddie / CMBS convention