Debt Yield on a $500,000 Multifamily Loan
Calculate the debt yield when a multifamily property generates $55,000 NOI and carries a $500,000 agency loan.
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%).
Multifamily agency lenders like Fannie Mae and Freddie Mac use debt yield alongside DSCR to underwrite loans on apartment buildings.
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.