Debt Yield for Apartment Loans: Formula and Example
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Debt yield is a property's net operating income (NOI) divided by the loan amount. If an apartment building earns $900,000 of NOI and the loan is $10,000,000, the debt yield is 9%. It tells a lender how much of the loan the property's income could repay in a single year, with no reference to the interest rate, the amortization or the property's value. Many lenders look at it next to DSCR and LTV, and a deal that passes the other two can still be cut back on the loan amount because of it. DoorRaise supports sponsors who raise equity for apartment buildings, and this post covers the lender metric you will meet while doing that.
This post is part of our guide to real estate syndication. It sits next to multifamily DSCR loans and multifamily underwriting basics. Practice is as of October 2026.
How do you calculate debt yield?
The formula is one line:
Debt yield = net operating income / loan amount
Use the NOI the lender uses, which is usually based on the trailing 12 months of income and expenses or an underwritten figure, not your pro forma. See rent roll and T-12. Lenders often apply their own vacancy, management fee and reserve assumptions, so their NOI can be lower than yours.
A worked example (made-up numbers)
An apartment building has lender-underwritten NOI of $900,000. Compare three loan sizes:
| Loan amount | Debt yield (NOI / loan) |
|---|---|
| $8,000,000 | 11.25% |
| $10,000,000 | 9.0% |
| $12,000,000 | 7.5% |
If a lender requires a debt yield of at least 9%, the largest loan it will make on this NOI is $900,000 / 0.09 = $10,000,000. At a 10% minimum, the cap is $9,000,000. The extra $1,000,000 has to come from equity, which a sponsor raises from investors. These numbers are made up to show the steps.
Debt yield vs. DSCR, LTV and cap rate
| Measure | Formula | What it ignores |
|---|---|---|
| Debt yield | NOI / loan | Interest rate, amortization, value |
| DSCR | NOI / annual debt payments | Value, and how much principal remains |
| LTV | Loan / value | Income and payments |
| Cap rate | NOI / value | The loan |
DSCR depends on the interest rate: a lower rate lets a lender allow a larger loan at the same coverage. Debt yield does not move with rates. That is why lenders like it when rates are low or falling and a value-based test could allow too much debt. When the loan equals the property's value, debt yield equals the cap rate, which links the two. See what is a good cap rate.
When does debt yield cut your loan?
- Low-rate deals with a high price. A property can pass DSCR and LTV because of a low interest rate and a high price, and still fall short on debt yield.
- Value-add deals. Lenders underwrite today's NOI, not the NOI after renovations. A building you plan to improve may have a weak debt yield at closing. See value-add business plans and bridge vs. agency loans.
- Refinances. A cash-out refinance sized by LTV may be cut by debt yield. See cash-out refinance.
What can a sponsor do if the debt yield is too low?
- Put in more equity so the loan shrinks.
- Raise NOI before the loan closes (rent, expenses, vacancy) if it can be shown in the numbers a lender will use.
- Ask whether another lender or loan type uses different tests.
- Check the purchase price. A lower price can raise the NOI-to-loan ratio.
- Revisit the plan in your sources and uses, because less debt means more equity to raise.
How DoorRaise fits in
DoorRaise is a technology platform, not a law firm, broker-dealer, investment adviser or funding portal, and it does not hold investor money. It does not arrange loans. After a sponsor sizes the equity they need, the platform generates the offering documents, runs e-signatures and accredited investor checks, tracks wires into escrow at Enterprise Bank & Trust, and files the Form D and state notices. Fees are $1,500 to set up (non-refundable), then $5,000 a year from closing (only if the deal closes). See how it works.
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FAQ
What is a good debt yield for an apartment loan?
There is no single number. Each lender sets its own minimum, and it changes with the lender, loan type, market and period. Ask your lender or broker for the current requirement.
Is debt yield the same as cap rate?
No, but they are related. Cap rate is NOI divided by value. Debt yield is NOI divided by the loan. If the loan equals the value, they are equal.
Why do lenders use debt yield instead of only DSCR?
DSCR changes with interest rates and amortization. Debt yield does not, so it gives the lender a view of the loan against income alone.
Does debt yield use my projected NOI?
Usually not. Lenders use trailing or underwritten NOI. Plan for a lower number than your pro forma.
Where does debt yield appear in the loan process?
In the term sheet or underwriting. Ask your broker for the lender's required metrics at the start. See also multifamily DSCR loans.
Sources
- Fannie Mae Multifamily: Conventional properties fact sheet
- Freddie Mac Multifamily: Conventional small balance loans
- Investor.gov: Investor bulletin on private placements
This post is general information as of October 2026, not legal, tax or investment advice. Talk to your own lender and advisers. The examples are simplified illustrations with made-up numbers, not a projection or an offer. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.