Debt yield calculator

Formula

Debt yield = net operating income ÷ loan amount. Use trailing or underwritten NOI, not a pro forma the lender has not accepted, and the full loan balance. To size a loan, invert it: maximum loan = NOI ÷ minimum debt yield.

Worked example

A property produces $850,000 of NOI and is valued at $14,000,000. The borrower asks for a $9,000,000 loan. Debt yield is $850,000 ÷ $9,000,000 = 9.44%. LTV is 64.3% and the cap rate on that value is 6.07%. If the lender's minimum is 10%, the largest loan it will make is $850,000 ÷ 10% = $8,500,000, so the request is cut by $500,000.

How lenders use it next to DSCR and LTV

Lenders size a loan to the tightest of three tests. DSCR caps the loan by what NOI can pay at the quoted rate and amortization. LTV caps it by the appraised value. Debt yield caps it by NOI alone, which is why lenders use it as the backstop: it does not improve when rates fall or when a low cap rate pushes the value up. On the example above, the $9,000,000 loan is a 1.245× DSCR at 6.5% on 30-year amortization and a 1.126× DSCR at 7.5%. Its debt yield is 9.44% in both cases.

Minimums vary by lender, property type, and market. Use the figure on your term sheet. Our debt yield guide covers how lenders set floors and stress NOI, the DSCR calculator sizes the same loan on coverage, and CRE loan underwriting covers what else lenders check.