Loan Sizing Cheat Sheet
A simple, lender-style way to size deals fast and explain which constraint binds (debt yield, DSCR, or LTV).
The 20-second sizing answer
Use this script
“I size to the most conservative constraint first—typically downside debt yield on conservative NOI—then cross-check DSCR at stressed rates and confirm LTV versus as-is and haircut-stabilized value. I finish by underwriting the exit to confirm takeout clears at a realistic cap and refi rate.”
1) Debt yield sizing (basis check)
What it is
Debt yield = NOI / Loan. Use conservative NOI (in-place or haircut-stabilized) to size downside.
Example
Conservative NOI$2.4mm
Target DY8.0%
Max loan$30.0mm
2) DSCR sizing (survivability check)
What it is
DSCR = NOI / Debt Service. In bridge, stress the rate (or include cap cost) and don’t rely on reserves to fake coverage.
Interview-friendly DSCR line
“I treat DSCR as survivability. In bridge, I stress the rate and confirm the deal can live through volatility—then I rely on structure (reserves/cash management) for timing risk.”
3) LTV sizing (value check)
What it is
Use the lesser of as-is, haircut-stabilized value, or cost. Avoid ‘best-case stabilized value’ sizing.
One sentence that sounds senior
“I’m not sizing off optimistic stabilized value—I’ll haircut stabilization and ensure lender basis is still money-good on a downside case.”
Putting it together (which constraint binds?)
When debt yield binds
- Volatile cash flow, transitional plan, uncertain NOI
When DSCR binds
- Higher rates, thin cash flow, limited ability to carry
When LTV binds
- Questionable valuation, weaker market liquidity, heavy capex