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Debt Yield Calculator
Calculate debt yield for 5+ unit and commercial investment properties — and see how your deal benchmarks against the 9–12% floors commercial lenders require.
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Debt yield
Enter deal metrics
NOI = gross income − operating expenses
Proposed or existing mortgage balance
Formula
Debt Yield = NOI / Loan Amount × 100
= $120,000 / $1,200,000 × 100 = 10.00%
Result
Debt yield
Acceptable — meets most lender floors
Lender benchmarks
Debt yield measures the return a lender would earn if it took the property back in foreclosure. It's rate-agnostic — unlike DSCR — so commercial lenders often use it as a backstop underwriting metric alongside LTV and DSCR. A 9–12% debt yield is typical for 5+ unit multifamily and commercial bridge lending.
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What is debt yield and why does it matter?
Debt yield is one of the most important — and least-understood — metrics in commercial real estate lending. The formula is simple:
Debt Yield (%) = Annual NOI ÷ Loan Amount × 100
Unlike DSCR, debt yield doesn't depend on the current interest rate or amortization structure. A property with $120,000 NOI and a $1,200,000 loan has a 10% debt yield whether the rate is 5% or 12%. This rate-independence is exactly why commercial lenders use it as a backstop underwriting metric.
Why commercial lenders care about debt yield
Imagine a 5-unit apartment building underwritten at 1.25 DSCR when rates are 6.5%. If rates rise to 9% and the borrower needs to refinance, the same property at the same loan amount only produces a 0.85 DSCR — below most lender floors. The original lender's collateral is now a workout risk.
Debt yield solves this: if the original loan was made at a 10% minimum debt yield, the lender knows the asset generates 10 cents of NOI for every dollar of loan outstanding. That relationship holds regardless of rates. Even at 12% interest, the NOI is still there. The lender's capital recovery in a foreclosure scenario is not dependent on the rate environment.
Benchmark thresholds by property type
| Property type | Typical floor | Strong tier |
|---|---|---|
| 5–20 unit multifamily | 8–9% | 11%+ |
| 20–100 unit apartment | 9–10% | 12%+ |
| Commercial / mixed-use | 9–10% | 11–12%+ |
| Office / retail | 9–11% | 13%+ |
| Bridge / value-add | 8–9% | 10%+ |
These are general ranges. Individual lenders set their own floors and may adjust them based on market conditions, property location, borrower strength, and loan program type.
How to calculate NOI accurately
NOI = Gross Potential Rent − Vacancy Allowance − Operating Expenses
Operating expenses include property taxes, insurance, property management (typically 8–10% of effective gross income), maintenance and repairs, landscaping, utilities (if landlord-paid), and any other costs required to keep the property operating. They do not include mortgage payments, depreciation, or income taxes.
Common mistake: including debt service in "expenses" when calculating NOI. NOI is pre-debt. Mortgage payments are applied after NOI to calculate cash flow. Using post-debt "income" as NOI will severely understate your actual debt yield and DSCR.
When debt yield constrains loan amount more than DSCR
On a high-value, low-yield commercial deal, debt yield can be the binding constraint even when DSCR looks fine. Example:
A 10-unit apartment building sells for $3,000,000 in a low-cap-rate market. NOI = $150,000. At 70% LTV (common for commercial), loan = $2,100,000. At 7.5% rate, annual debt service = $176,600. DSCR = $150,000 / $176,600 = 0.85 — already below 1.0, which is a problem.
But even if you reduce the loan to produce 1.00 DSCR: at 7.5%, max debt service for 1.0 DSCR is $150,000. That implies a max loan of approximately $1,250,000. Debt yield at $1,250,000 = $150,000 / $1,250,000 = 12% — strong. In this case, DSCR is the binding constraint, not debt yield.
In a different scenario — a market with a 5% cap rate and very low NOI relative to value — debt yield may push the max loan lower than DSCR would. Lenders use the binding constraint, not the more favorable metric.
Next steps
- Also check your 1–4 unit DSCR deals with the DSCR Calculator.
- See how different rates affect your DSCR with the DSCR at Different Rates calculator.
- Get matched with small-balance multifamily DSCR lenders who underwrite both DSCR and debt yield.
Frequently asked questions
What is debt yield in real estate?
Debt yield is the ratio of a property's Net Operating Income (NOI) to the loan amount, expressed as a percentage. It tells a lender: if they took the property back in foreclosure today, what annual return would they earn on their capital invested in the loan? A debt yield of 10% means the NOI is 10% of the loan amount. Unlike DSCR or LTV, debt yield is independent of interest rates and amortization schedules.
What is a good debt yield?
Commercial and multifamily lenders typically require a minimum debt yield of 9–12% for 5+ unit multifamily and commercial properties. 9% is often the floor for bridge lenders; 10% is more typical for permanent financing; 12%+ is considered strong and may unlock the best terms. A debt yield below 9% on commercial CRE can result in a reduced loan amount regardless of LTV or DSCR.
How is debt yield different from DSCR?
DSCR (Debt Service Coverage Ratio) depends on the interest rate and amortization schedule — it changes when rates change. Debt yield is rate-agnostic: it's simply NOI ÷ loan amount. A lender can use debt yield as a backstop: even if DSCR looks fine at today's 7% rate, a 9% debt yield floor ensures the loan makes sense even if rates rise significantly and the borrower refinances at a higher rate in the future.
What counts as NOI?
NOI (Net Operating Income) = gross rental income − all operating expenses (including property taxes, insurance, property management, maintenance, and vacancy). It specifically excludes debt service (mortgage payments), capital expenditures, and income taxes. On a 5-unit apartment building collecting $7,500/month in rent with $3,000/month in operating expenses, NOI = $54,000/year.
Does debt yield apply to small 1–4 unit DSCR loans?
Not typically. Debt yield is primarily a commercial underwriting metric used for 5+ unit multifamily, office, retail, industrial, and mixed-use properties. Most 1–4 unit DSCR loans are underwritten using DSCR (rent ÷ PITIA) and LTV rather than debt yield. If your deal is a duplex, triplex, or fourplex, focus on DSCR. Debt yield matters once you're in the commercial or small-balance multifamily lending world.
Why do lenders use debt yield as a backstop metric?
Lenders use debt yield to stress-test loan decisions against rate changes. In a rising-rate environment, a loan that underwrites at 1.25 DSCR at 6.5% might only produce a 0.90 DSCR at 9%. Debt yield doesn't move with rates — so an 11% debt yield loan remains 11% regardless of whether rates go to 9% or 12%. It gives the lender confidence that the asset will cover debt service across a wide range of rate scenarios.
How does debt yield relate to cap rate?
Debt yield and cap rate both use NOI but measure different things. Cap rate = NOI ÷ property value. Debt yield = NOI ÷ loan amount. Because the loan amount is less than the property value (due to the down payment), debt yield is always higher than cap rate on a given property. A 7% cap rate property with 75% LTV has a debt yield of approximately 7% ÷ 0.75 = 9.3%. Strong debt yield and strong cap rate often go together, but they can diverge.
Can I improve debt yield without increasing NOI?
Yes — by reducing the loan amount. A smaller loan relative to the same NOI produces a higher debt yield. This means a larger down payment or a lower purchase price. If your deal is below 9% debt yield, calculate the maximum loan amount that achieves 9%: max loan = NOI ÷ 0.09. Any loan above that number produces a sub-9% debt yield, regardless of DSCR or LTV.