JB PARCELDebt Yield Calculator
Debt yield is NOI divided by the loan amount. Commercial lenders use it because it cannot be gamed by a low rate or a long amortization. Here is yours, and the loan it supports.
How this calculator works
Debt yield is net operating income divided by the loan amount, expressed as a percentage. A $2,100,000 loan on a property producing $184,000 of NOI is an 8.76 percent debt yield. The lender is asking a blunt question: if they foreclosed tomorrow and owned this building free and clear, what cash-on-cash return would they earn on the dollars they put out?
It exists because DSCR and LTV can both be manipulated. Stretch the amortization to forty years and DSCR improves without a dollar of new income. Find a friendly appraisal and LTV improves without anything changing about the building. Debt yield has no rate, no term, and no appraised value in it, so none of those levers touch it.
Commercial lenders typically want 8 to 11 percent depending on asset class. Stabilized multifamily in a strong market sits at the low end. Hotels, self-storage in a thin market, and single-tenant retail with short remaining term sit at the high end.
The Advanced options run all three sizing tests at once. Lenders size to the tightest of debt yield, LTV cap, and DSCR floor, so the smallest number is your real proceeds. Knowing which one binds tells you what to negotiate: more NOI, a better appraisal, or a longer amortization.
Worked example: a Nashville flex building
A 34,000 square foot flex property at $2,650,000 producing $184,000 of stabilized NOI. The lender quotes a 9 percent debt yield floor, 70 percent LTV cap, and 1.25x DSCR at 6.9 percent over 25 years.
| Max loan at 9% debt yield | $2,044,444 |
|---|---|
| Max loan at 70% LTV | $1,855,000 |
| Max loan at 1.25x DSCR on a 25-year amortization | $1,751,348 |
| Actual proceeds | $1,751,348 |
DSCR binds here, not debt yield and not LTV, which tells you exactly where to push. Move the amortization from 25 years to 30 and the DSCR-constrained loan rises to $1,862,536, at which point the 70 percent LTV cap takes over at $1,855,000 and you have picked up $103,652 of proceeds without changing a thing about the building. Knowing which test binds is the whole value of running all three.
Questions investors ask
What is a good debt yield?
8 to 11 percent is the normal lender range. Stabilized apartments and grocery-anchored retail sit at the low end. Hotels, short-remaining-term single tenant, and anything in a secondary market sits at the high end. Ask your lender for their floor by asset class before you underwrite, because it is the single number that most often caps proceeds on a commercial deal.
Why do lenders use debt yield instead of DSCR?
Because DSCR moves when the rate or the amortization moves, and neither of those tells you anything about the building. In a low-rate environment a weak property can post a strong DSCR. Debt yield strips rate and term out and measures the property's cash flow against the lender's exposure. It became standard in CMBS underwriting after the 2008 cycle for exactly that reason.
How is debt yield different from cap rate?
Cap rate is NOI over value. Debt yield is NOI over the loan. If you borrow at 70 percent LTV, your debt yield is your cap rate divided by 0.70. A property at a 6.5 percent cap with 70 percent leverage produces a 9.29 percent debt yield. That relationship is why low cap rate markets struggle to get proceeds when lenders hold their debt yield floors.
Does debt yield apply to residential rentals?
Not usually by name. Small residential lenders lead with DSCR and LTV. But the underlying idea travels fine: if your NOI over your loan amount is under 8 percent, you are highly levered relative to the income no matter what your DSCR says. Run it alongside the DSCR calculator.
What raises debt yield on a deal that is short?
Only two things: more NOI or a smaller loan. Rate and term do nothing. That is a useful clarity, because it points you straight at the operating statement. Under-market rents, expense line items the seller carried that you will not, uncollected reimbursements in a NNN lease, and vacant square footage are the usual sources.
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Screening a real property? Pull its appraised value, assessed value, acreage, land use, and last recorded sale off the JB PARCEL parcel map and drop the real numbers into this calculator instead of guessing. Coverage runs across every county we carry.