Bridge Loans in CRE: As-Is and Stabilized Debt Yield
Bridge lenders test debt yield twice — on current income and on stabilized NOI. Here is how both tests work and why failing one sinks the deal.
Debt Yield Calculation
A free debt yield calculator for commercial real estate: enter NOI and loan amount to run the debt yield calculation in seconds, then size the maximum loan across debt yield, DSCR, and LTV constraints — and see which one binds.
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Workflow
How it works
Follow the underwriting path lenders use: input the deal, apply constraints, then read the result.
Step 1
Enter NOI and loan amount
Type your net operating income and the loan amount to get the debt yield instantly. No loan amount yet? Enter a minimum debt yield instead and the calculator returns the maximum loan that figure supports.
Debt Yield Calculation: Formula and Worked Example
Debt yield is net operating income divided by the loan amount, expressed as a percentage. The debt yield ratio — the two terms mean the same thing — is the figure lenders use to gauge how quickly they would recover their money in a default. Lenders prefer it over loan-to-value and debt service coverage because it is independent of the interest rate, the amortization period, and the appraised value. A borrower cannot engineer a better debt yield by stretching amortization or shopping for a higher appraisal — only real income or a smaller loan moves it. The formula also runs in reverse: maximum loan equals NOI divided by the minimum debt yield. A lender requiring a 10% debt yield on a property generating $800,000 of NOI will cap the loan at $8,000,000 regardless of what the appraisal says the building is worth. That single line of arithmetic is why debt yield so often surprises borrowers who sized their deal on LTV alone. Full loan sizing applies all three constraints simultaneously — debt yield, LTV, and DSCR — and the binding constraint is whichever produces the lowest maximum loan. The lender lends the smallest of the three, so the constraint that binds is the only one that ultimately matters for proceeds.
Last reviewed by Commercial Real Estate Finance Reviewers on .
Debt Yield = NOI ÷ Loan Amount
Max Loan = NOI ÷ Minimum Debt Yield
Binding Loan = MIN(Max by DY, Max by LTV, Max by DSCR)Example
A property with $1,200,000 NOI and a $12,000,000 loan has a debt yield of 1,200,000 ÷ 12,000,000 = 10.0%. Run in reverse at an 8% minimum, the same NOI supports a maximum loan of 1,200,000 ÷ 0.08 = $15,000,000. If that property is worth $16,000,000 at 75% max LTV ($12,000,000) and DSCR caps the loan at $13,500,000, the binding constraint is LTV — the lender funds $12,000,000, the lowest of the three.
Preset scenarios
See This Calculator in Action
Start with a lender-style example, then adjust the calculator inputs for your deal.
Common securitized-loan screen
CMBS 10% debt yield
- NOI: $1,200,000
- Loan amount: $12,000,000
- Minimum debt yield: 10%
Scenario result10.00% Debt Yield
The request clears a common CMBS debt-yield screen before DSCR and LTV are tested.
Debt Yield vs DSCR vs LTV
| Metric | Formula | What It Tests |
|---|---|---|
| Debt Yield | NOI / Loan Amount | Income cushion against the loan balance |
| DSCR | NOI / Annual Debt Service | Payment coverage based on rate and amortization |
| LTV | Loan Amount / Property Value | Collateral leverage against value |
Common Debt-Yield Screens
| Lender Type | Typical Screen | Why It Matters |
|---|---|---|
| Conventional bank | 8%-9% | Often paired with relationship underwriting and DSCR |
| Agency multifamily | 8%-9% | Program, market, and reserves still matter |
| CMBS | 10%+ | Frequently used as a central proceeds constraint |
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Property A — Multifamily (CMBS target) | NOI $1,200,000 ÷ Loan $11,000,000 | 10.91% debt yield — clears the 10% CMBS floor |
| Deal B — Retail (fails minimum) | NOI $640,000 ÷ Loan $9,000,000 | 7.11% debt yield — below the 8% floor, likely declined |
| Property C — Office (LTV binds) | NOI $2,000,000; Value $25,000,000 @ 70% LTV; 6.5% / 30yr | Max by DY $20.0M, DSCR $21.1M, LTV $17.5M → LTV binds at $17,500,000 |
| Property D — Industrial (DSCR binds) | NOI $900,000; Value $11,000,000 @ 75% LTV; 8.0% / 25yr; 1.25x | Max by DY $10.0M, LTV $8.25M, DSCR $7.77M → DSCR binds at ~$7,775,000 |
| Deal E — High-NOI (maximizing proceeds) | NOI $5,000,000 ÷ 9% minimum debt yield | $55,555,556 maximum loan at a 9% debt yield |
Conversion reference
| Lender Type | Min Debt Yield | Max LTV (Typical) | Min DSCR (Typical) |
|---|---|---|---|
| Conventional Bank | 8–9% | 70–75% | 1.25x |
| CMBS Lender | 10%+ | 65–75% | 1.25x |
| Agency (Fannie/Freddie) | 8–9% | 75–80% | 1.20x |
| Life Company | 9–11% | 60–65% | 1.30x |
| Bridge / Debt Fund | 7–8% | 70–80% | 1.10x |
Quick facts
- Total U.S. commercial and multifamily real estate debt outstanding stood at roughly $4.7 trillion in recent Mortgage Bankers Association estimates.
- CMBS is a meaningful slice of CRE lending, with annual U.S. private-label issuance typically running in the tens of billions of dollars.
- CMBS lenders commonly require a minimum debt yield of about 10%, versus roughly 8–9% for many balance-sheet banks.
- Debt yield ignores the interest rate and amortization period entirely, so it cannot be improved by restructuring loan terms.
- Because it divides NOI by the loan, debt yield doubles as a quick estimate of the unlevered cash-on-cash return a lender would earn if it foreclosed.
Edwin Toe
Principal Underwriter & CRE Debt Advisor
- Former Vice President of Commercial Mortgage Underwriting at a Tier-1 CMBS origination bank
- Over 12 years of institutional experience sizing, structuring, and closing over $1.5B in CRE debt
- Calculations verified against standard CRE underwriting methodology used by institutional lenders and CMBS originators
- Methodology reviewed for debt yield, DSCR, LTV, cap rate, and loan sizing consistency
Edwin Toe is an institutional commercial real estate underwriting veteran who has spent over a decade sizing, structuring, and executing senior debt, mezzanine financing, and agency loans. He reviews each calculator and guide on this site to ensure they precisely reflect the criteria, formulas, and stress hurdles used by credit committees and CMBS securitization pools. Outputs are educational screening estimates, not formal financial advice.
Methodology: formulas are calculated from borrower-entered inputs using standard CRE underwriting relationships for NOI, debt yield, DSCR, LTV, cap rate, loan constant, and maximum loan proceeds.
Reviewer note: pages are reviewed for formula accuracy and updated when lender benchmarks or site methodology changes.
Disclaimer: results are educational estimates only and are not financial, legal, tax, valuation, or lending advice.
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Frequently asked questions
Debt yield is a property's net operating income divided by the loan amount, expressed as a percentage. It tells a lender how quickly it would recover its money from the property's income alone if it had to foreclose, independent of the interest rate, amortization, or appraised value.
Most lenders look for a debt yield of at least 8–10%. Conventional banks often accept 8–9%, agency lenders sit around 8–9%, and CMBS lenders typically require 10% or more. Higher debt yields mean lower leverage and lower risk for the lender.
Debt service coverage ratio (DSCR) divides NOI by the annual loan payment, so it changes with the interest rate and amortization period. Debt yield divides NOI by the loan balance and ignores loan terms entirely. A low rate or long amortization can flatter DSCR while debt yield stays put, which is why lenders use debt yield as a rate-proof backstop.
Cap rate divides NOI by the property's value or purchase price; debt yield divides NOI by the loan amount. Cap rate measures the asset's return, while debt yield measures the lender's protection. Two deals with the same cap rate can have very different debt yields depending on how much is borrowed.
CMBS loans are pooled and sold to bond investors, are typically non-recourse, and are hard to renegotiate once securitized. To protect those investors, CMBS originators demand a larger income cushion relative to the loan — usually a 10%+ debt yield — so the loan stays safe even if values fall.
CMBS lenders generally require a minimum debt yield around 10%, and sometimes higher for riskier property types such as hotels or secondary-market retail. The exact floor varies by lender, asset class, and market conditions.
Divide NOI by the minimum debt yield (as a decimal). For example, $800,000 of NOI at a 10% minimum debt yield supports a maximum loan of 800,000 ÷ 0.10 = $8,000,000. This caps the loan regardless of the appraisal.
Lenders size a loan against three limits at once — debt yield, loan-to-value, and DSCR — and lend the smallest result. The binding constraint is whichever of the three produces the lowest maximum loan, and it is the only limit that actually determines your proceeds.
Only by borrowing less. Because debt yield is NOI divided by the loan amount, reducing the loan request raises the ratio. Unlike DSCR or LTV, it cannot be improved by negotiating a lower rate, extending amortization, or obtaining a higher appraisal — the only levers are more income or a smaller loan.
The lender will usually reduce the loan amount until the debt yield clears its minimum, ask for more equity, or decline the deal. Sizing your loan on debt yield first — before LTV or DSCR — avoids being surprised by a lower number at the term-sheet stage.
No. Every calculation runs entirely in your browser and nothing is sent to a server. The figures are estimates for screening purposes and are not a loan commitment or professional advice.
Using a debt yield ratio calculator is the fastest way to size a commercial real estate loan. You simply input your Net Operating Income (NOI) and the requested loan amount, and the tool instantly computes the unlevered return for the lender. This saves you from building manual spreadsheets while quickly revealing if your deal clears typical lender hurdles.
To calculate the debt yield ratio, divide your property's Net Operating Income (NOI) by the total Loan Amount, then multiply by 100 to get a percentage. Unlike DSCR, the debt yield ratio formula completely ignores interest rates and amortization periods, giving lenders a pure measure of their income cushion.