Debt Yield Calculator
Find the debt yield on a commercial loan.
Results update as you type.
How it works
Debt yield is a measure lenders use to gauge the risk of a commercial real estate loan, and this calculator finds it from net operating income and the loan amount. You enter the property's net operating income and the proposed loan amount, and it returns the debt yield as a percentage. Debt yield answers a simple question from the lender's point of view: if the borrower defaulted and the lender took over the property tomorrow, what cash-on-cash return would the loan amount earn from the property's income? Because it depends only on income and loan size, debt yield ignores the interest rate, loan term, amortization schedule, and prevailing cap rates, which can all be manipulated or fluctuate. This makes it a pure, stable measure of leverage risk that became especially popular after the financial crisis, when low rates and long amortizations were masking risky loans. Lenders typically require a minimum debt yield, often around 10 percent, to approve a loan; a higher debt yield means the loan is smaller relative to the property's income and therefore safer. Borrowers can raise debt yield by increasing net operating income or requesting a smaller loan. Enter the net operating income and loan amount to compute the debt yield.
Debt yield = net operating income / loan amount × 100
Debt yield divides a property's net operating income by the loan amount and multiplies by 100. It shows the return a lender would earn if it took over the property, independent of interest rate, amortization, or market cap rates. Higher debt yields mean lower lending risk, which is why lenders set minimum debt-yield thresholds.
Source:Real estate finance
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter net operating income (noi) and loan amount.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Debt yield updates instantly as you type — no button to press.
Frequently asked questions
What is debt yield?
Debt yield is the ratio of a property's net operating income to the loan amount, expressed as a percentage. It represents the return a lender would earn on the loan if it took ownership of the property. Unlike other metrics, it ignores interest rate and amortization, giving a pure measure of the loan's risk relative to income.
What is a good debt yield?
Lenders commonly require a minimum debt yield of around 10 percent, though the threshold varies by property type, market, and lender risk appetite. A higher debt yield means the loan is smaller relative to the property's income and therefore less risky. Borrowers seeking maximum leverage aim to just meet the lender's required minimum.
How is debt yield different from cap rate?
Cap rate divides net operating income by the property's value or price, measuring the property's return. Debt yield divides the same income by the loan amount, measuring the lender's protection. Cap rate reflects the asset, while debt yield reflects the loan. A lender uses debt yield because it does not depend on fluctuating market values.
Why do lenders prefer debt yield?
Debt yield cannot be manipulated by lowering the interest rate or lengthening the amortization, which can make riskier loans look acceptable under metrics like DSCR or loan-to-value. Because it depends only on income and loan size, debt yield gives lenders a stable, conservative view of risk that holds up regardless of interest rate cycles or inflated valuations.
How can I increase debt yield?
Raise the property's net operating income by increasing rents or cutting operating expenses, or request a smaller loan amount. Because debt yield is income divided by loan size, either action increases it. Borrowers often improve net operating income before refinancing, or accept lower leverage, to meet a lender's required debt yield.