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Back-of-the-napkin commercial real estate underwriting, in seconds.
5 Second Model · back-of-the-napkin underwriting
Max Loan Size
Sized by DSCR and by LTV. The lender lends the smaller one.
Lenders do not size a loan one way. They test the income with a DSCR floor, the collateral with a maximum LTV, and the downside with a minimum debt yield, then lend the smallest of the three. This calculator runs all three tests and names the binding constraint, which is the piece most borrowers miss. When rates rise, DSCR usually becomes the constraint and the loan shrinks even though the property has not changed.
Statement of assumptions & returnsAll figures USD · annual unless noted · click any number to type it exactly
Maximum loan
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Constrained by income vs constrained by collateral
| Constrained by DSCR | -- |
| Constrained by LTV | -- |
| Constrained by debt yield | -- |
| Sized on interest-only | -- |
| Loan proceeds | -- |
| Cash to close | -- |
| Annual debt service | -- |
| Cash flow after debt | -- |
| Resulting DSCR | -- |
| Resulting debt yield | -- |
| Loan constant | -- |
Why two numbers: when rates rise, DSCR usually becomes the binding constraint and the loan shrinks even though the property hasn't changed.
Interest-only sizing: a lender who tests coverage against the IO payment will lend meaningfully more, because there is no principal in the payment. Most size on the amortizing constant and grant IO separately — treat the IO number as the optimistic case, not the quote.
Common questions
- Why did my loan amount drop when rates rose?
- Because DSCR sizing is a function of the payment, not the price. A higher rate means a bigger payment, which means less loan supported by the same NOI, even if the appraised value is unchanged.
- Will a lender size on interest-only?
- Some will, and it produces a materially larger loan because there is no principal in the payment. Most size on the amortizing constant and grant IO separately. Treat IO sizing as the optimistic case.
- What is a typical LTV on commercial property?
- Sixty-five to seventy-five percent is common for stabilized assets, lower for transitional or single-tenant risk. But LTV is often not the binding constraint — coverage usually is.