Debt yield is the lender metric that cuts through the noise of rates and amortization, and this free calculator gives it to you fast. Enter the net operating income and the loan amount, and you get the debt yield.
Where LTV depends on an appraised value and DSCR depends on your rate and amortization, debt yield ignores all of that and asks a simpler question: what return would the lender earn if they had to take the property back today? That is why more lenders lean on it. Here is the tool, then how it works.
Debt yield, in one line: it is net operating income divided by the loan amount, shown as a percentage, and it measures loan risk independent of rate, amortization, and value.
What lenders want: many commercial lenders look for a debt yield of at least 8% to 10%, with the exact floor depending on the property type and the lender.
The Debt Yield Formula
The formula is debt yield = net operating income ÷ loan amount. A property with $130,000 of NOI and a $1,300,000 loan has a debt yield of 10%. That is the cash return the lender would earn on their loan balance from the property's income alone.
The reason lenders like it is that it cannot be manipulated by stretching the amortization or by a generous appraisal. DSCR can be improved with a longer amortization, and LTV depends on the value someone assigns, but debt yield only cares about the real income and the real loan, which makes it a cleaner measure of risk.
How Debt Yield Sizes Your Loan
Just like DSCR, debt yield can cap your loan. If a lender requires a 10% debt yield and the property produces $130,000 of NOI, the largest loan they will make is $1,300,000, regardless of what LTV or DSCR would allow. When debt yield is the binding constraint, the only way to a bigger loan is more NOI. It sits alongside LTV and DSCR as the three ratios lenders use together.
Watch: How To Finance Your First Commercial Property
Debt Yield FAQ
How do you calculate debt yield?
Divide net operating income by the loan amount. A property with $130,000 of NOI and a $1,300,000 loan has a debt yield of 10%.
What is a good debt yield?
Many lenders look for a debt yield of at least 8% to 10%. The exact floor depends on the property type, the market, and the individual lender.
Why do lenders use debt yield?
Because it is not affected by the interest rate, the amortization period, or the appraised value. It measures the property's income against the loan directly, making it a cleaner gauge of risk.
How is debt yield different from DSCR?
DSCR compares income to the actual loan payment, so it changes with rate and amortization. Debt yield compares income to the loan balance itself, so it strips those variables out.
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Explore CRE CentralDebt yield works alongside DSCR and LTV. See all the commercial calculators.