Validate NOI
Use a consistent period and understand how vacancy, expenses and reserves affect the lender’s accepted NOI.
GUIDE & CHECKLIST
Understanding Debt Yield
Debt yield divides annual property net operating income by the proposed loan amount. $150,000 NOI on a $1.5 million loan equals 10%.
Why this matters
Debt yield is annual property net operating income divided by loan amount. For example, $150,000 NOI divided by a $1.5 million loan is 10%. It is one way to view property leverage, alongside DSCR and LTV.
Work through the details
Divide by loan amount
Debt yield reflects the relationship between property income and proposed debt without assuming a particular interest rate.
Compare other measures
DSCR assesses payments; LTV assesses value. All three can point to different constraints.
Preparation checklist
- Confirm how the lender calculates NOI
- Use consistent stabilized or in-place income assumptions
- Compare debt yield with DSCR and LTV
- Review lease rollover and operating expense risks
Questions that can slow a request
Stabilized versus in-place income
Expected rent growth may not be credited the same way as signed leases and collections.
Ignoring lease rollover
A current yield can weaken if a major tenant leaves or expenses rise.
How Alliance helps
When the property looks strong but a lender offers less debt than expected, the sizing method matters. Alliance reconciles net operating income and compares debt yield with coverage and value. You get a clearer explanation of what limits proceeds and which assumptions deserve attention.
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Educational guidance only. Requirements and calculations depend on the lender, program and transaction; this is not an approval or a lender-specific checklist.
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