Debt 2: DSCR, LTV and debt yield

Three lenses on the same loan. DSCR = NOI ÷ annual debt service — cash-flow safety; lenders commonly want 1.20–1.35×. LTV = loan ÷ value — proceeds and collateral cushion; note it inherits every argument about value. Debt yield = NOI ÷ loan — the lender's cure-all: value-free, rate-free, "what do I earn if I own this tomorrow"; minimums around 8–10% are typical.

They bind differently as markets move. When rates rise, DSCR becomes the binding constraint (same NOI, bigger payment → smaller loan). When values inflate, LTV flatters and debt yield quietly disciplines. Sizing is min(loan by DSCR, loan by LTV, loan by debt yield) — whichever is smallest wins.

Refinance math is where these bite: a maturing loan at yesterday's rate meets today's DSCR test. If in-place NOI cannot carry the new payment at the old balance, the "refi" becomes a paydown conversation — the situation to see coming 12–18 months early.