Debt Yield: $200,000 NOI on a $2 Million Loan
A $200,000 annual NOI divided by a $2,000,000 loan balance produces a 10% debt yield, right at the common lender minimum.
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%).
For larger commercial loans, lenders apply the same debt yield formula regardless of loan size, making this metric scale-agnostic.
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.