Cap Rates and Commercial Loan Sizing

Capitalization rates translate NOI into value. When cap rates expand, values compress—which can reduce maximum loan proceeds even if property operations are unchanged.

Debt yield as a guardrail

Many lenders also apply a minimum debt yield (NOI divided by loan amount). In softer valuation environments, debt yield—not LTV—often becomes the binding constraint.

Practical takeaway

Stress-test acquisition models with wider exit cap rates and confirm that refinance proceeds still cover bridge balances. Use our cap rate and debt yield calculators to sanity-check assumptions.