Overview · What & why
A decision, before a calculation.
Lenders look at several dimensions of leverage. Loan-to-value compares debt with collateral value; loan-to-cost compares it with project cost. Debt service coverage compares income with scheduled payments. Debt yield compares NOI with principal. A loan can satisfy one test and fail another, especially when interest rates or costs change.
A concrete example
A $9M loan on a $15M property has 60% LTV. $900K NOI with $750K annual debt service gives 1.20× DSCR and 10% debt yield. Those are illustrative measurements, not universal lending thresholds.
What to remember
Leverage must pass both collateral and cash-flow tests.
Before using this in a project: Loan amount, amortization, interest rate, lender NOI adjustments, valuation and covenants.