FCCR vs DSCR

DSCR formula (recap)

DSCR = NOI ÷ Annual Debt Service

NOI is gross rent minus operating expenses (taxes, insurance, vacancy, maintenance, CapEx, property management). Annual debt service is principal + interest across the year.

Typical lender minimum: 1.20–1.25 for investor DSCR loans; 1.25+ for conventional; 1.20+ for small-balance commercial.

Want the full DSCR deep-dive? See What is DSCR?.

FCCR formula

FCCR = (NOI + Fixed Charges) ÷ (Debt Service + Fixed Charges)

Where "Fixed Charges" typically includes:

• Long-term operating leases — ground rent, land leases, or equipment leases with commitment terms > 12 months
• Preferred stock dividends (for corporate borrowers with preferred equity in the cap stack)
• Capital lease payments — equipment financed through capital leases treated like debt
• Other contractually-committed payments a lender views as debt-equivalent (mandatory pension contributions, some deferred comp)

Fixed charges appear on both sides of the ratio because they're expenses that reduce operating cash flow AND obligations the entity has to meet. Adding them to both the numerator and denominator gives a more conservative — and often more realistic — view of true coverage.

Worked example — the difference in practice

A small commercial property leased to a single tenant that pays its own ground lease:

• Gross rent: $180,000/yr
• Operating expenses (excluding ground lease): $54,000/yr
• Ground lease payment: $24,000/yr
• NOI (traditional): $180,000 − $54,000 = $126,000
• NOI-after-ground-lease: $126,000 − $24,000 = $102,000
• Annual debt service: $90,000

• DSCR = NOI ÷ Debt Service = $126,000 ÷ $90,000 = 1.40. Looks safe.
• FCCR = (NOI + $24k ground) ÷ (Debt Service + $24k ground) = $150,000 ÷ $114,000 = 1.32. Still safe, but tighter — and lenders paying attention to FCCR see the ground lease as an obligation on par with the mortgage.
• "NOI-after-fixed" DSCR (a hybrid some lenders use): $102,000 ÷ $90,000 = 1.13. Fails a 1.20 minimum.

Which ratio the lender uses matters — the same deal produces different pass/fail results depending on the definition.

When lenders use FCCR instead of DSCR

• Commercial real estate with ground leases. Ground-leased properties (common in some downtown urban markets, land-lease resorts, and airport-area assets) have a fixed non-mortgage obligation that would otherwise get netted into NOI. Lenders often prefer FCCR to make it explicit.
• Small-balance commercial with an operating business. If the buyer is a small business owner buying their own commercial building (SBA 504, SBA 7a), lenders often want to see FCCR that includes the business's other fixed obligations, not just the real estate loan.
• REIT / corporate real estate underwriting. Institutional real estate finance uses FCCR to reflect capital lease obligations, preferred dividends, and other fixed corporate obligations that DSCR ignores.
• Mixed-use with tenant with fixed charges. If the property is leased to a franchise operator with meaningful franchise fees or royalty commitments, some lenders will look at FCCR from the tenant's perspective to gauge tenant health.

When you probably don't need FCCR

For residential investment property — single-family rentals, small multifamily (2-4 units), even most 5+ unit apartment buildings held by individual investors — DSCR is the relevant ratio and FCCR doesn't add material information. Individual investors don't typically have ground leases, capital leases, or preferred dividends attached to their properties.

If you're being asked for FCCR on a residential deal, ask the lender what fixed charges they're including — sometimes it's a category-mismatch (using a commercial underwriting template on a residential loan) and DSCR is what actually matters.

Typical FCCR minimums

• Commercial DSCR loans: 1.20–1.25 (usually stated as DSCR, but FCCR is applied when relevant)
• SBA 504 / 7a: 1.25 FCCR typical; some programs down to 1.15
• Life insurance / CMBS commercial: 1.30–1.40 FCCR common
• Bank commercial: Varies widely by institution; 1.20–1.35 range typical

How to raise a failing FCCR

Same levers as DSCR (put more down, raise rent, cut expenses, find cheaper loan), plus one FCCR-specific option:

• Renegotiate the fixed charge itself. If a ground lease has an option to prepay or restructure, doing so can move the payment out of "fixed charge" territory. Same for capital leases — buyouts convert a fixed charge into a one-time expense.
• Push charges into an operating expense category. Some lenders will accept certain payments (e.g., short-term equipment rentals under 12 months) as operating expenses rather than fixed charges, which changes the ratio math. Depends on the lender.

How Prop-Folio surfaces DSCR (and where FCCR would fit)

Prop-Folio's core surface is residential investment property — 1-4 unit single-family and small multifamily — where DSCR is the relevant metric. DSCR is computed live and factored into the Deal Score across Buy & Hold and BRRRR strategies.

For deals where FCCR matters (commercial with ground leases, mixed-use with operating tenants), Prop-Folio doesn't currently compute FCCR — the app is optimized for residential where the ratio doesn't apply. If you're underwriting a deal that requires FCCR, you'll need to compute it manually or use commercial-focused underwriting software.

Check your deal's DSCR  →

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Related: What is DSCR? · Cap rate vs cash-on-cash vs DSCR · Hard money + DSCR in Chicago