Variables and units
Net Operating Income
Income after operating expenses.
currency
Loan Amount
Total loan amount.
currency
Real Estate · Loan
Debt Yield
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Use debt yield as a lender-focused view of income relative to debt exposure.
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Loan risk screen
Net Operating IncomeLoan Amount
$150,000 NOI on a $1,200,000 loan equals a 12.5% debt yield.
Common mistakes
- Using property value as denominator.
- Treating debt yield and cap rate as interchangeable.
Step-by-step example
Loan risk screen
1. Start with the example inputs
- Net Operating Income$150,000
- Loan Amount$1,200,000
2. Apply the formula
Net Operating IncomeLoan Amount3. Run the numbers
12.5%
$150,000 NOI on a $1,200,000 loan equals a 12.5% debt yield.
What this result means
A debt yield of 12.5% is the lender's view: the income return on the loan amount itself, untouched by interest-rate or amortization assumptions. Many commercial lenders want roughly 8–10% or more — below their floor, the loan shrinks regardless of what an appraisal says.