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10: The Great Deleveraging, a Fundrise market analysis

Onward, a Fundrise Production

CHAPTER

The Debt Service Coverage Ratio in Real Estate

If you're a borrower and you expect to be paying 3 to 4% forever, you can take out a bigger loan because as a share of what you make as a company, it's just not going to be that much. But it's different, of course, if the rate on the loan goes way up. They basically say, if you have a $100,000 annual payment, we want you to have 25 to 50% more income so that if your income goes down, whatever there's some problem with the property or the company, there's still going to be enough income to pay the loan. That's called a debt service coverage ratio in real estate.

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