The formula to calculate the Debt Yield Ratio (DYR) is:
\[ DYR = \frac{NOI}{LA} \]
Where:
The Debt Yield Ratio is a financial metric used in commercial real estate to assess the risk of a loan. It is calculated by dividing the net operating income (NOI) of a property by the loan amount. A higher debt yield ratio indicates a lower risk for lenders, as it suggests that the property generates sufficient income to cover the loan. This ratio is particularly useful for lenders to evaluate the potential return on investment and the financial stability of the property.
Definition: Debt yield is a measure used in real estate to assess the risk of a loan by comparing the property's net operating income to the loan amount.
Formula: \( \text{Debt Yield} = \frac{\text{Net Operating Income}}{\text{Loan Amount}} \)
Example: \( \text{Debt Yield} = \frac{150,000}{1,500,000} \)
Definition: The debt ratio is a financial ratio that measures the extent of a company’s leverage.
Formula: \( \text{Debt Ratio} = \frac{\text{Total Debt}}{\text{Total Assets}} \)
Example: \( \text{Debt Ratio} = \frac{300,000}{1,000,000} \)
Definition: Yield on debt is the return that an investor can expect to earn if the debt is held until maturity.
Formula: \( \text{Yield on Debt} = \frac{\text{Annual Interest Payment}}{\text{Current Market Price}} \)
Example: \( \text{Yield on Debt} = \frac{10,000}{200,000} \)
