Debt yield is a lender’s metric calculated as NOI divided by loan amount, used to assess the risk of a loan independent of interest rate or amortization assumptions.
Because debt yield ignores the interest rate and amortization, it gives lenders a simple way to compare loans on different terms. For example, a property with $500,000 of NOI and a $5,000,000 loan has a 10.0% debt yield. Lenders set minimums that vary by lender, property type, and market, and a stronger tenant and longer lease term can support a lower threshold. For buyers, it is one more reason the lease and tenant quality affect how much financing is available.