Debt Yield Calculator

Most institutional lenders want a debt yield of 10% or higher, and CMBS credit committees treat 9% to 10% as a common floor for standard property types. Hotels and operationally intensive assets are typically held to higher minimums. Bridge lenders and debt funds accept lower going-in debt yields, often 6% to 7%, when the business plan credibly grows NOI to an acceptable stabilized level.

Debt yield equals Net Operating Income divided by the loan amount, expressed as a percentage. For example, $850,000 of NOI on a $10,000,000 loan is an 8.5% debt yield. To find the maximum loan a lender's floor supports, divide NOI by the minimum debt yield: $850,000 / 0.10 = $8,500,000 at a 10% floor.

DSCR moves with interest rates and amortization, and LTV moves with appraised value, so both can flatter a deal in a low-rate or aggressively valued market. Debt yield compares property income directly to loan dollars, which makes it immune to rate movements and appraisal assumptions. It answers the purest credit question: if the lender owned the property tomorrow, what return would the income produce on the money lent?

In low-cap-rate markets, debt yield usually binds first. A property trading at a 4.5% cap rate hits a 10% debt yield floor at roughly 45% of value, far below a 65% to 75% LTV limit. In higher-cap-rate markets the LTV or DSCR test tends to bind instead. Maximum-leverage requests in gateway markets often route to debt funds or add mezzanine behind a conservatively sized senior loan for exactly this reason.