Commercial & AppraisalAdvanced

What Is Rent Coverage Ratio?

Rent coverage ratio compares a property's net operating income to the ground rent or lease payments owed on it — commonly used in ground-lease and leasehold financing to show how comfortably the income covers the rent obligation.

Most useful for: Commercial Investor

At a Glance

Rent Coverage Ratio

Rent Coverage Ratio=NOI÷Ground Rent(or Lease Payment)

Formula

Rent Coverage Ratio = \frac{NOI}{Ground Rent} (or Lease Payment)

Rent Coverage Ratio = NOI ÷ Ground Rent (or Lease Payment)

Related Terms

DSCR Net Operating Income

More Commercial & Appraisal Terms

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This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.

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