Question 1

What is debt yield in commercial real estate?

Accepted Answer

Debt yield is stabilized net operating income divided by the loan amount, expressed as a percentage. It measures a lender's return if it had to foreclose and operate the property, and because it ignores interest rate and amortization, it stays leverage-independent. What counts as acceptable depends on market, asset class, and lender program.

Question 2

What is loan-to-cost and how is it calculated?

Accepted Answer

Loan-to-cost (LTC) is the loan amount divided by the total project cost, expressed as a percentage. It tells you how much of the total development or acquisition cost the debt covers, and the remainder is the equity you fund.

Question 3

What does this calculator compute and what inputs does it need?

Accepted Answer

You enter total project cost, loan amount, and stabilized NOI. The calculator returns loan-to-cost as loan divided by total cost, equity required as total cost minus the loan, and debt yield as NOI divided by the loan amount.

Loan-to-Cost & Debt Yield Calculator

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