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The times interest earned ratio indicates the extent of which earnings are available to meet interest payments. A lower times interest earned ratio means less earnings are available to meet interest payments and that the business is more vulnerable to increases in interest rates and being unable to meet their existing outstanding loan obligations.
In commercial real estate finance, DSCR is the primary measure to determine if a property will be able to sustain its debt based on cash flow. In the late 1990s and early 2000s banks typically required a DSCR of at least 1.2, [ citation needed ] but more aggressive banks would accept lower ratios, a risky practice that contributed to the 2007 ...
A company's times interest ratio indicates how well it can pay its debts while still investing in itself for growth. A higher ratio suggests to investors that an investment in the company is ...
The PRA stated that the determination of affordability should incorporate an Interest coverage ratio (ICR) calculation, which it defined as: “the ratio of the expected monthly rental income from the buy-to-let property to the monthly interest payments which take into account likely future interest rate increases.”
Typical covenants for real estate related loans are the Loan to Value Ratio (LTV), the debt service coverage ratio (DSCR) and Interest Service Coverage Ratio (ISCR). Covenants can potentially have negative consequences as well.
A real-estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom or reduce interest rates. [1]
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For income-producing real estate, the NOI is the net income of the real estate (but not the business interest) plus any interest expense and non-cash items (e.g. -- depreciation) minus a reserve for replacement. The CAP rate may be determined in one of several ways, including market extraction, band-of-investments, or a built-up method.