Debt Yield Formula
The debt yield formula divides annual NOI by loan amount. It helps show income support for debt without using interest rate or amortization, but it does not replace DSCR, LTV, appraisal, or lender review.
Estimates are based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, tax, or lending advice.
Run the number, then pressure-test the assumptions.
The debt yield formula divides annual NOI by loan amount. It helps show income support for debt without using interest rate or amortization, but it does not replace DSCR, LTV, appraisal, or lender review.
Use this page to understand the metric directionally, then compare it against financing, reserves, repair risk, cash flow, and your own constraints.
Debt yield = annual NOI / loan amount
If annual NOI is $30,000 and loan amount is $400,000, debt yield is 7.5%.
Use the formula inside a full deal model
DealSharp helps compare assumptions, debt service, cash flow, and risk flags so this metric is not reviewed in isolation.
Open DealSharpHow to read this number
The useful move is not treating one number as a final answer. Use it to decide which assumptions deserve more review, then compare the result against cash flow, financing, reserves, repair risk, and your own constraints.
Inputs required
- Annual NOI.
- Loan amount.
- Consistent expense and vacancy assumptions.
Outputs explained
- Debt yield percentage.
- Income support relative to loan balance.
- Context for comparing DSCR and LTV.
Assumptions to review
- NOI is calculated before debt service.
- Loan amount matches the tested financing scenario.
- Lender standards may require other metrics.
What this tells you
- Debt yield rises when NOI is higher relative to debt.
- It can compare leverage without rate assumptions.
- It can highlight debt levels that need closer review.
What this does not tell you
- Debt yield does not include interest rate, amortization, or borrower profile.
- It can mislead when NOI is incomplete or optimistic.
Common mistakes
- Using gross rent instead of NOI.
- Ignoring reserves and recurring repairs.
- Treating debt yield as the only financing metric.
FAQ
Why use debt yield with DSCR?
Debt yield compares NOI to loan amount. DSCR compares NOI to payment, so both answer different debt questions.
Does debt yield change with interest rate?
Not directly. Debt yield uses NOI and loan amount, while DSCR changes with debt service.
Run the full deal before deciding
This page helps with one metric or workflow. DealSharp is built for full real estate deal analysis: assumptions, financing, cash flow, repair scenarios, DSCR, cap rate, and risk flags based on your inputs.
Open DealSharpDisclaimer
DealSharp provides calculation and scenario-modeling tools for informational purposes only. Outputs are estimates based on your inputs and assumptions. DealSharp does not provide financial, investment, legal, lending, tax, or accounting advice. Verify important decisions with qualified professionals.