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Debt Yield
Debt yield expresses a property's net operating income as a percentage of the loan amount.
Debt yield expresses a property's net operating income as a percentage of the loan amount. Its formula compares income with debt rather than property value or scheduled debt-service payments.
Property operations example: identify the income period and loan amount used. Keep this ratio separate from debt-service coverage and loan-to-value when explaining a property's financial measures.
Source: OCC, Comptroller's Handbook, Commercial Real Estate Lending, Version 2.0, p. 43.
Frequently Asked Questions
Does a lower interest rate directly change the debt-yield formula?
Not by itself. The formula uses net operating income and the loan amount, rather than the interest rate or amortization period.
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