Debt Yield
Debt yield is a property's net operating income divided by its loan amount, expressed as a percentage — a leverage-agnostic stress test used by CMBS and portfolio lenders.
What it means
Debt Yield = NOI ÷ Loan Amount. It asks: if the borrower defaulted tomorrow and the lender took the property, what would the yield on their position be based on current income?
Debt yield is independent of interest rate, amortization, and appraised value — the three variables that can be inflated to juice LTV and DSCR. CMBS lenders typically underwrite to 8–10% debt yield minimums; that's why deals that look fine on DSCR sometimes fail on debt yield.
When cap rates compress faster than income grows, debt yield tightens and lenders reduce loan proceeds.
Example
A property with $400K NOI and a $5M loan has a debt yield of 400 / 5,000 = 8%.
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