Debt Yield Calculator
Calculate debt yield — NOI divided by the loan amount — the leverage-neutral metric commercial lenders use to size and stress-test loans.
How to use this tool
- Enter the property's annual net operating income (NOI).
- Enter the proposed or outstanding loan amount.
- Read the debt yield percentage.
- Check the maximum loan supported at a 10% debt-yield floor.
- Compare against your lender's required minimum (often around 10%).
Debt yield is the leverage-neutral ratio commercial lenders lead with. Enter NOI and the loan amount to get the debt yield, the lender band, and the maximum loan a 10% floor would support.
Formula
Debt yield is the lender's return if it had to take the property back on day one:
Debt yield = (NOI ÷ Loan amount) × 100
Max loan at 10% debt yield = NOI ÷ 0.10
Unlike DSCR or LTV, debt yield ignores the interest rate, amortization, and appraised value, so it can't be gamed by cheap rates or aggressive valuations.
How it works
Debt yield is the metric commercial lenders trust most because it cannot be manipulated. It divides net operating income by the loan amount, expressing the lender's cash-on-cash return if it foreclosed and owned the property free and clear. Because the formula contains no interest rate, no amortization schedule, and no appraised value, a low rate or a generous appraisal can't inflate the size of the loan the property supports.
Most commercial lenders set a floor around 10%, meaning the maximum loan is roughly NOI divided by 0.10. Tighter credit pushes the floor higher; competitive markets push it lower. Reading debt yield alongside DSCR and loan-to-value gives a complete leverage picture: DSCR can be flattered by low rates and long amortization, and LTV by optimistic values, but debt yield stays anchored to actual income.
Reviewed by the AbraCalc Real Estate Desk. The maximum-loan figure assumes a 10% debt-yield floor; substitute your lender's required minimum to re-size the loan. This calculator provides general information, not investment advice; verify figures and assumptions against your own underwriting before acting.
Worked example
$60,000 NOI on a $750,000 loan
- Debt yield = $60,000 ÷ $750,000 × 100 = 8.00%.
- Max loan at a 10% floor = $60,000 ÷ 0.10 = $600,000.
- 8% sits between 8% and 10%, so the band is Marginal.
Debt yield 8.00% | Max loan at 10% debt yield $600,000.00 | Marginal (8-10%)
Debt yield by NOI and loan amount
| NOI | $625,000 loan | $1,000,000 loan | $1,250,000 loan |
|---|---|---|---|
| $50,000 | 8.00% | 5.00% | 4.00% |
| $75,000 | 12.00% | 7.50% | 6.00% |
| $100,000 | 16.00% | 10.00% | 8.00% |
Key terms
- Debt yield
- NOI divided by the loan amount; the lender's unlevered return on the loan.
- Debt-yield floor
- The minimum debt yield a lender will accept, commonly around 10%.
- Loan-to-value (LTV)
- Loan amount divided by appraised value; a separate leverage check that depends on valuation.
- DSCR
- Debt service coverage ratio — NOI over debt service; depends on the interest rate and amortization, unlike debt yield.
Frequently asked questions
- What is a good debt yield?
- Commercial lenders commonly require a minimum debt yield around 10%. Higher is safer for the lender; below roughly 8% is considered aggressive leverage. The exact floor moves with credit conditions and property type.
- Why do lenders use debt yield over DSCR or LTV?
- Debt yield ignores the interest rate, amortization, and appraised value, so it can't be inflated by cheap financing or an optimistic appraisal. It ties the loan size directly to the property's actual income.
- How does debt yield set the loan amount?
- Divide NOI by the required debt yield. At a 10% floor, a property with $60,000 NOI supports a maximum loan of $600,000 ($60,000 ÷ 0.10), regardless of rate or value.