Debt Yield
Debt yield is NOI divided by the loan amount — the lender's return if it had to take the property back day one. It can't be gamed by low rates or long amortization.
Debt yield is a property's net operating income divided by the loan amount. A property with $900,000 of NOI and a $10,000,000 loan has a 9% debt yield.
How it's used: lenders set a minimum debt yield (commonly 8–10%) as a sizing constraint alongside LTV and DSCR. It answers a blunt question: if the lender foreclosed and owned the asset today, what unlevered cash return would the loan balance earn?
Why it matters: debt yield is the one leverage test that can't be manipulated by a low interest rate, interest-only periods, or a 30-year amortization — all of which can flatter DSCR. Because it ignores the rate and the payment entirely, it's the metric lenders lean on most in volatile-rate markets. A thin debt yield means the loan is large relative to the income, regardless of how cheap the debt looks.
Formula: Debt yield = NOI ÷ Loan amount
It's a close cousin of yield-on-cost (which uses total cost instead of the loan). Check coverage and sizing together on the DSCR calculator.
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