Debt Yield Calculator
Debt yield ignores your rate, your amortization, and the appraiser's cap rate. That is what makes it the test that quietly caps your proceeds. Here is how to run it backwards.
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What Debt Yield Measures
Debt yield is net operating income divided by the loan amount. A property throwing off $1,000,000 of NOI against a $10,000,000 loan carries a 10% debt yield. Read it as the unlevered return the building would hand the lender if the lender ever had to take the keys.
The number ignores your interest rate, your amortization schedule, and the cap rate on the appraisal. That is the whole reason lenders watch it. Coverage improves when rates fall, and loan-to-value improves when values rise, but neither of those events adds a dollar of rent. Debt yield moves only when the property's income moves or the loan balance moves.
Sizing Proceeds Backwards From It
Flip the formula and it stops being a diagnostic and becomes a ceiling. Divide NOI by the minimum debt yield a lender will accept and you have the largest balance that one test permits.
| $1,000,000 NOI at a 9% minimum | $11,111,111 maximum loan |
|---|---|
| $1,000,000 NOI at a 10% minimum | $10,000,000 maximum loan |
| $1,000,000 NOI at a 12% minimum | $8,333,333 maximum loan |
Arithmetic only, shown to illustrate the inversion. The minimum debt yield is set by the lender and the program, not by this calculator, and it is not published as a fixed number the way an agency LTV cap is.
Now run that same NOI through your loan-to-value limit and your coverage limit. Three tests, three maximum loan amounts, and you get the smallest of them. When rates rise faster than values, debt yield is frequently the constraint that binds first, and it is the one multifamily borrowers check last.
Where Does the NOI Come From?
From the lender's underwriting, not from your pro forma. The operating statement gets rebuilt before this division ever happens, which usually lowers the numerator and therefore the loan. Our NOI calculator covers what belongs in that figure, and our DSCR calculator handles the coverage test.
Estimates only. Debt yield minimums vary by program, market, and asset, and your loan documents control. Tell us what the property earns and what you are trying to borrow, and the desk will size all three constraints against current program parameters.
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