What debt yield measures
Debt yield compares a property's annual net operating income, or NOI, with the current or proposed loan amount:
Debt yield = annual NOI ÷ loan amount
Methodology review: July 18, 2026 · Calculator formula version debt-yield@1.0.0
The result is expressed as a percentage. If annual NOI is $100,000 and the loan amount is $1,000,000, debt yield is $100,000 ÷ $1,000,000 = 10.00%.
The Office of the Comptroller of the Currency's Commercial Real Estate Lending handbook defines debt yield using this NOI-to-loan relationship. The handbook also explains that debt yield should be considered with other criteria, including debt-service coverage and loan-to-value analysis, rather than used as a complete credit decision.
Use one reviewed NOI convention
Debt yield is only as useful as the NOI placed in the numerator. DealYield's baseline follows noi@1.0.0: effective gross income minus recurring property operating expenses for the same annual period, before debt service, financing fees, depreciation, income taxes, acquisition and sale costs, and one-time capital projects.
The Fannie Mae Multifamily Guide defines underwritten NOI as effective gross income minus operating expenses as adjusted by the lender. That adjustment language matters. Owners, lenders, appraisers, and statements may differ on vacancy, management costs, replacement reserves, and normalized expenses.
Use the NOI Calculator to audit income, vacancy, and itemized expenses before carrying NOI into the Debt Yield Calculator. If a lender supplies a different underwritten NOI, keep its source and adjustments visible.
Forward calculation and inverse questions
The calculator answers three related questions from the same entered scenario:
- Current debt yield:
NOI ÷ loan amount - Required NOI at a target:
loan amount × target debt yield - Maximum loan amount at a target:
NOI ÷ target debt yield
The inverse outputs do not predict an approved loan. They show the value that would exactly meet the user's selected target while every other input remains unchanged.
For example, with $80,000 of NOI, a $1,000,000 loan, and an editable 10.00% target:
- Debt yield is
$80,000 ÷ $1,000,000 = 8.00%. - Required NOI is
$1,000,000 × 10.00% = $100,000. - The modeled NOI shortfall is
$80,000 − $100,000 = −$20,000. - Maximum loan amount at the target is
$80,000 ÷ 10.00% = $800,000. - The entered loan exceeds that modeled amount by $200,000.
Those differences describe the entered math. They are not instructions to increase income, reduce debt, or accept a financing offer.
Debt yield, DSCR, cap rate, and LTV are different
These ratios use different denominators and answer different questions:
- Debt yield is
NOI ÷ loan amount. It compares property income with debt principal. - DSCR is
NOI ÷ annual debt service. It compares property income with scheduled loan payments. - Cap rate is
NOI ÷ property value. It compares property income with a value assumption before financing. - Loan-to-value, or LTV, is
loan amount ÷ property value. It measures leverage against the selected collateral value.
Debt yield does not directly use interest rate or amortization. DSCR does through annual debt service. Cap rate and LTV depend on a property-value input, while debt yield does not.
Use the DSCR Calculator to inspect payment coverage, the Mortgage Payment Calculator to model payment terms, and the Cap Rate Calculator to connect NOI with property value. A later combined loan-sizing workflow can compose these separate constraints without changing their formulas.
Why the target remains editable
DealYield pre-fills 10.00% only as a worked example. It is not a market benchmark, lender requirement, qualification rule, or recommended minimum.
Debt-yield targets and even input definitions can vary with:
- Lender and loan program
- Property type and operating stability
- Market conditions
- Whether NOI is trailing, current, projected, or lender-adjusted
- Whether the debt amount includes only the proposed senior loan or a broader lien scope
- Other underwriting strengths, weaknesses, and stress assumptions
Use the target documented for the actual analysis. If there is no documented target, treat any hypothetical value as a scenario rather than a rule.
Zero and non-positive inputs
When loan amount is zero, debt yield is unavailable because the denominator is zero. The calculator does not label that state as infinity.
When NOI is zero or negative, the entered ratio can be zero or negative for a positive loan, but no positive loan amount can satisfy a positive target under the inverse formula. DealYield therefore marks the maximum-loan result unavailable and emits a visible warning.
These states preserve the evidence rather than replacing a weak operating scenario with a favorable-looking ratio.
Reviewing a debt-yield result
- Confirm NOI and the loan amount describe the same property and analysis date.
- Reconcile NOI with leases, collections, statements, taxes, insurance, repairs, management, utilities, and reserve assumptions.
- Confirm which debt or liens the analysis expects in the denominator.
- Keep the target source visible and editable.
- Review lower-NOI scenarios instead of relying on one operating case.
- Compare debt yield with DSCR, LTV, loan terms, property condition, borrower requirements, and the lender's documentation.
The calculator's sensitivity view reruns debt-yield@1.0.0 with NOI moved by −10%, −5%, +5%, and +10% while the entered loan amount and target remain fixed. Those rows are scenarios, not forecasts or probabilities.
Debt yield is an underwriting input, not a loan offer or eligibility decision. DealYield does not verify property statements, normalize NOI for a lender, select the debt scope, or replace lending, accounting, legal, tax, or investment advice.