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This episode is a business coaching course that explains what the annual debt service is.

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Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Definition Magician: Annual Debt Service: The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.

business real estate taught by Thrive15.com, an alternative to Lynda.com

-All right, we're here in sunny San Diego on Thrive15.com, . My first time being outside this year. We have this bird we've trained to make noise while we're recording, and we are talking about annual debt service with Michael-there-is-no-real-estate-topic-too-obscure Burer. Michael, welcome on the program. Can I get a boom?

All right, now, I'm going to read the definition, and then I'd like you to provide us an ample example that my third grade mind can handle. So here we go.

-I'll do my best.

-Annual debt service-- the total amount of principal and interest to be paid each year to satisfy the obligations of a loan. What does that mean? What's an ample example?

-There's a pretty simple one, but simply, it's just adding up everything you're giving to the bank. So all the interest you paid during the year, if the principal is due on a loan, you would add that to the total cost, add all that up. That's annual debt service.

-OK, so if I'm a Thriver, I just bought my first office building. I have a business. The business has done well. I've now bought the building. I bought the building for $2 million. My monthly bill's $15,000. I'm paying my mortgage every month, $15,000. Again, how do I know what my annual debt service is?

-So typically, your mortgage is going to include principal and interest-- two different things. The principal is the pay down of that debt. The total amount you pay during that specified period, about a year, would be your annual debt service. All the checks you write, add them all up. That's your annual debt service.

-Now, Michael, I couldn't appreciate you talking about annual debt service anymore if I tried. Thank you.

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