What is a debt coverage ratio, and how does it affect apartment rents in Nashville ($1880)?

 From investopedia:

• The debt-service coverage ratio (DSCR) measures a business’s cash flow (Net Operating Income) divided by its debt payments, including principal and interest. 
• Lenders use a DSCR between 1.15 and 1.5 to determine whether to make a loan to a developer.

Here is an example, involving the cheapest loan available.

• A Nashville builder can build apartments for $167K/unit= $150K(construction) + $17K(land)
• FHA is willing to lend at $167K at 6% for 40-years, resulting in a debt payment of $986/month.  
• With FHA's DSCR of 1.15, the builder must make at least $1134/month in Net Operating Income (NOI) to qualify for a loan.  
• With 7% vacancy the expected NOI increases to $1213/month
• Add operating cost to NOI to get Rent=$667+$1213=$1880/month 

New apartment supply will enter the market when Nashville rents rise 20% to $1880.

HT:  Bill H.