For years, LTV was the number that governed an acquisition. Sponsors and brokers priced deals against a max-LTV grid, and the rest of the underwriting followed from there. That assumption still shapes how a lot of files get shopped, but it's increasingly the wrong place to start.
Cap rates have repriced faster than replacement cost, and in-place NOI hasn't caught up. The result: on a growing share of the files we underwrote this quarter, in-place income couldn't clear a debt yield floor even where LTV still had room. Debt yield determined final proceeds on the majority of acquisitions above $15M we sized in the period, not the LTV headline the sponsor came in expecting.
Two floors worth naming specifically: CMBS conduit paper on multi-family typically carries a 7.5% debt yield floor, and build-to-rent stabilized product is capped by an 8.0% floor. Whichever of LTV, DSCR, or debt yield is most restrictive on your file governs, full stop, regardless of what the other two would allow.
Run the debt yield math first: in-place NOI divided by the proposed loan amount, tested against each source's floor. If debt yield is the binding constraint, the LTV number you were quoted on the phone isn't the number that shows up in the term sheet. Better to know that on day one than on day thirty.
"The LTV headline is a marketing number. Debt yield is the underwriting number. Solve for both before you name a price."
When debt yield governs, the lever that moves proceeds isn't a better rate, it's NOI. Sponsors who can document a credible path to higher in-place income (a lease-up, a rent bump already in place, expense recoveries not yet reflected) can often push proceeds further than one who just shops harder for leverage. That's a story a complete file tells; a summary sheet doesn't.
We're seeing the debt yield constraint bind most on stabilized multi-family and office acquisitions priced off pre-2023 comps, and least on industrial and newer-vintage multi-family where in-place income has kept pace with basis. If your asset falls in the first bucket, size against debt yield before you set expectations with your client or your equity.