Would like to have DCR ratios in REMA

GarthChapman

Frequent Forum Member
REIN Member
Aug 30, 2007
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#2
DCR calculations for both CIBC and TD are contained in the Portfolio Report titled `Peter Kinch`s Mortgage Cashflow Worksheet. Also in that report are Rent Offest calculations at 70%, 80% and 100%. The various banks and other lenders use the rent offset calculations to determine financial viability of your rental properties.

DCR stands for Debt Coverage Ratio. THe ratio is the amount that the income is above all the expenses (most of which are set as pre-determined percentages of the income) including mortgage payment. So if rents are $1,000 and expenses are $900 then 100/90 = 1.11 - so the ratio in the example is 1.11

Rent Offest calculations
: This is done by subtracting a set percentage from the income and what remains must be above the mortgage payment in order to be cashflow positve in the eyes of the lender. So if rent is $1,000 and your lender uses a 70% rent offset the calculation is 1,000 x 70% = $700. If the mortgage is $765 per month then that property is negative cashflow (or upside down) by $65 per month. And that lender will require you to debt service that $65 from your income.

Hope that helps
 

JoeRagona

Frequent Forum Member
Registered
Jan 10, 2008
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Oakville, ON
engagedinvestor.com
#3
So Garth,

When I run the report, the first page shows my DCR worksheet and I`m guessing AUTOMATICALLY adjusts the rent payment to calculate the LTV for that property correct?

Because all the rent numbers are off