Debt Yield

A debt yield is defined as the ratio of net operating income to a total value of a loan.

Debt yield. How to Use Debt Yield to Determine the Right Loan Amount. Divide the propertys net operating income by the proposed loan amount. Debt Yield DY Net Operating Income NOI Loan amount.

DY NOI L. Just take your stabilized NOI divide it by your target debt yield and the resulting value is your loan amount. Figure out the Net Operating Income of the subject property.

Its quite simple really. How to figure out Debt Yield for a proposed loan. The following formula is used to calculate a debt yield.

100 1000000 10000000. While its pretty clear how LTV and DSCR relate to the operation of the property its typically less clear to those new to real estate what the debt yield tells a lender. You have 300000 in cash and would like to borrow 700000 to purchase the building.

Debt yield is a risk measure for mortgage lenders and measures how much a lender can recoup their funds in the case of default from its owner. The debt market uses several calculations to determine the yield. The debt yield calculation is widely used by various lending sources and became common place after the real estate crash.

What Does Debt Yield Mean. For example lets say that a commercial property has a NOI of 437000 per year and some conduit lender has been asked to make a new first mortgage loan in the amount of 6000000. For example if a property had a net operating income of 500000 a year and a borrower wanted to take out a 5 million loan the debt yield would be.