Debt Yield Calculator
Calculate the debt yield of a commercial real estate loan (NOI ÷ loan amount), check it against the lender’s minimum and find the maximum loan your property’s net operating income supports.
How it works
Debt yield = net operating income ÷ loan amount × 100 · maximum loan = NOI ÷ minimum debt yield · LTV = loan ÷ property value
Debt yield measures how much of the loan the property’s net operating income would return each year if the lender had to take the building back. Unlike LTV it does not depend on an appraised value or a cap rate, and unlike DSCR it ignores the interest rate and amortization, which is why CMBS and bank lenders adopted it after 2008 as a floor on loan size. A higher debt yield means less risk for the lender; minimums of about 8%–12% are typical depending on property type and market.
Worked example
A property earning a NOI of 500,000 with a 4,500,000 loan has a debt yield of 500,000 ÷ 4,500,000 = 11.11%, above a 10% lender minimum. At 10% the maximum loan is 500,000 ÷ 0.10 = 5,000,000, leaving 500,000 of headroom. With a value of 7,000,000 the LTV is 64.29% and the implied cap rate 7.14%.
Sources: Adventures in CRE — How to use debt yield to calculate loan amount · HUD.loans — Debt yield for multifamily loans
Frequently asked questions
What is a good debt yield?
Lenders commonly ask for at least 8%–10% on stabilized multifamily and 10%–12% on office, retail or hotel loans. Anything well above the lender’s minimum gives room to refinance even if values or rates move.
How is debt yield different from DSCR?
DSCR compares NOI with the annual loan payment, so it changes with the interest rate and amortization. Debt yield compares NOI with the loan balance only, so it is a pure measure of how much income backs each unit of debt.
How do I find the maximum loan from a debt yield?
Divide NOI by the minimum debt yield as a decimal. With a NOI of 500,000 and a 10% minimum the loan cannot exceed 5,000,000, regardless of the appraised value or the rate.
Should NOI include reserves?
Use the underwritten NOI the lender will use: stabilized rents minus vacancy, operating expenses and usually replacement reserves, excluding debt service, depreciation and income taxes.
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Educational estimate, not lending, legal, tax or investment advice. Lenders, landlords and appraisers apply their own definitions, fees and underwriting rules — confirm the figures with them or a licensed professional before you sign anything.