Debt Yield
Debt yield is net operating income divided by the loan amount — the return a lender would earn on its loan basis if it took the property back. Unlike DSCR, it ignores interest rate and amortization, making it a rate-proof measure of leverage. Commercial lenders typically require a debt yield of at least 8%.
Formula
Debt Yield = NOI ÷ Loan Amount × 100Lenders adopted debt yield after learning that low interest rates can make risky leverage look safe: cheap debt inflates DSCR while the loan balance stays just as large. Debt yield cuts through this by comparing income directly to loan proceeds.
At an 8% minimum debt yield, maximum loan = NOI ÷ 0.08, or 12.5× NOI. CMBS lenders in particular lean on this constraint.