27 December, 2025 | Understanding Debt Yield in Commercial Real Estate

In commercial real estate, debt yield is more than just a financial term—it’s a cornerstone of risk assessment for lenders. This critical metric, calculated by dividing a property’s Net Operating Income (NOI) by the loan amount, helps determine the financial viability of a project. Simply put, it’s how lenders gauge risk and decide how much they’re willing to lend.
Consider this example: With an NOI of $5 million, a debt yield of 9% might result in a $56 million loan. However, if a lender applies a more conservative 10% debt yield, the loan size decreases to $50 million. This shift can significantly impact developers, emphasizing why understanding debt yield is essential for anyone navigating real estate financing.
In our latest video, Steve Ogier, CEO of ContraVest, breaks down how debt yield influences loan sizing and what it means for developers like us. Whether you’re new to the concept or looking for deeper insights, this quick 4-minute explainer will empower you to make more informed investment decisions.