Question

Given the following information, calculate the debt yield ratio on the following commercial property: estimated net operating income in the first year: $2,500,000; debt service in the first year: $960,000; loan amount: $20,000,000; purchase price: $27,300,000.

Answer 1

12.5%

Step-by-step explanation:

Debt yield ratio = Net operating income / Loan amount

Debt yield ratio = $2,500,000 / $20,000,000

Debt yield ratio = 0.125

Debt yield ratio = 12.5%

Thus, the debt yield ratio on the commercial property is 12.5%