Investing metrics
Debt yield
Debt yield is annual net operating income divided by the loan amount or outstanding loan balance, expressed as a percentage.
Glossary
Investing metrics
What is debt yield?
Primary references on this page:
The OCC describes debt yield as a leverage-risk measure independent of interest rate, amortization period, and capitalization rate. Lower debt yield indicates more debt relative to NOI, but no single percentage is a universal approval threshold. Use normalized NOI and state whether the denominator is proposed amount or current balance.
How debt yield works
Divide the same supportable NOI used in underwriting by the specified loan amount. Review debt yield alongside DSCR, LTV, lease rollover, tenant concentration, condition, and stressed cash flow rather than optimizing one metric in isolation.
Formula: debt yield = annual NOI ÷ loan amount or balance × 100
Worked example
Annual NOI of $140,000 divided by a $1,400,000 loan produces a 10.0% debt yield. The same NOI against a $1,750,000 loan produces 8.0%, showing the effect of greater leverage.
Common mistakes and review checks
Treat the result or document as one input to a decision. Verify the current source document, definitions, dates, and transaction facts before relying on it.