Debt Yield
Quick answer
Debt yield is net operating income divided by the loan amount, measuring a lender's return if it had to take back the asset.
Debt yield is a leverage test that ignores interest rates and amortization, which makes it the most rate-neutral constraint a lender applies. Most commercial lenders require a minimum debt yield of 8% to 10%; in higher-rate environments debt yield frequently becomes the binding constraint on proceeds, ahead of both LTV and DSCR.
Formula
Debt Yield = Net Operating Income ÷ Loan Amount
Example: $1,000,000 NOI ÷ $11,000,000 loan = 9.1% debt yield
Related product: Bridge Loans
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