Depreciation effect on your debt coverage ratio and income

[Mike Arias]

Is it common practice to add depreciation taken on multi family properties as an operating expense? I spoke to  a bank recently and this topic was brought up.

Example:

Asset depreciated amount 400k

25 yr depreciation schedule= 16000 yr

NOI 72,000/34,067(debt service)= 2.11 debt coverage ratio

NOI 72,000-16,000 (depreciation)= 56,000/ 34,067(debt service)= 1.64 debt coverage ratio