Full Definition
Debt yield is calculated as NOI / Loan Amount, expressed as a percentage. Unlike DSCR, debt yield is independent of interest rates — it measures how quickly the lender could recover its loan from the property's income if it had to foreclose. Typical lender debt yield requirements: 8-10% for stabilized assets.
Example
A $5M loan on a property with $500K NOI has a 10% debt yield. Higher debt yield = lower lender risk.
Related Terms
DSCR (Debt Service Coverage Ratio)
Ratio of NOI to annual debt service. Lenders require 1.20x-1.30x+ typical for commercial loans.
LTV (Loan-to-Value)
Loan amount as a percentage of property value. Typical commercial LTV ranges 65-80%.
NOI (Net Operating Income)
Annual income from a property after deducting operating expenses — before debt service, taxes, and capital expenditures.