How do you calculate debt yield?

Divide net operating income by the loan amount. $520,000 of NOI on a $5,000,000 loan is a 10.4% debt yield.

What is the difference between debt yield and DSCR?

DSCR compares NOI with the loan's payments, so it moves with the rate and amortization. Debt yield compares NOI with the loan itself, so it does not.

What is the difference between debt yield and cap rate?

Both divide NOI by something. A cap rate divides by the property's value, and a debt yield divides by the loan. It is the lender's version of a cap rate.

Is a higher debt yield better?

For a lender, yes: more income per dollar lent means more cushion. For a borrower, a higher requirement means a smaller loan.

Free tool and guide

Debt yield calculator the lender's rate-free test

Debt yield asks a simple question: what does the property earn on the lender's money? Enter NOI and a loan below to get the yield, the largest loan at a target, and the NOI that loan would need.

Use the Debt yield calculator Read the guide

Debt yield is a property's net operating income divided by the loan amount. A $5,000,000 loan on $520,000 of NOI has a 10.4% debt yield. Unlike DSCR, it does not change with the interest rate or amortization, and unlike loan-to-value, it does not depend on an appraisal.

Debt yield calculator

Enter NOI and a loan to get the debt yield, plus the largest loan and the NOI needed at the yield you test. It runs in your browser: your numbers are not uploaded, saved or tracked, and there is no sign-up.

Showing invented example numbers

Debt yield: 10.40%; NOI divided by the loan
Largest loan at the yield tested: $5,777,778
NOI needed at the yield tested: $450,000
Loan-to-value: 62.5%

Arithmetic only, with no market benchmarks. This is not a loan quote or advice.

The debt yield formula

Debt yield = NOI / loan amount. Rearranged, largest loan = NOI / target debt yield, and NOI needed = loan x target debt yield.

A worked example

$520,000 of NOI on a $5,000,000 loan is a 10.40% debt yield. Tested at 9%, this NOI supports up to $5,777,778, and the $5,000,000 loan would need $450,000 of NOI.

Why lenders use it

Test	Changes with	Weak spot
Loan-to-value	The appraised value, and so the cap rate	Values can rise with the market, then fall
DSCR	The rate and amortization	Low rates or interest-only can make a large loan look safe
Debt yield	Only NOI and the loan	Ignores payment terms and property quality

Debt yield is also the lender's return if it took the property over at the loan amount: a lender thinks of it as its yield on cost in a foreclosure. That is why it is a useful check when values and rates are moving.

What debt yield do lenders want?

It depends on the lender, the property type and the market, so ask yours. The 9% default here is only an example. A lender usually applies it alongside DSCR and loan-to-value, and sizes to the lowest result.

Frequently asked

How do you calculate debt yield?: Divide net operating income by the loan amount. $520,000 of NOI on a $5,000,000 loan is a 10.4% debt yield.
What is the difference between debt yield and DSCR?: DSCR compares NOI with the loan's payments, so it moves with the rate and amortization. Debt yield compares NOI with the loan itself, so it does not.
What is the difference between debt yield and cap rate?: Both divide NOI by something. A cap rate divides by the property's value, and a debt yield divides by the loan. It is the lender's version of a cap rate.
Is a higher debt yield better?: For a lender, yes: more income per dollar lent means more cushion. For a borrower, a higher requirement means a smaller loan.

Pacific Software Ventures built this tool and guide, and sells AI consulting and training to commercial real estate firms. This is general education, not investment, legal or tax advice.

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