Frequently Asked Questions: Terms

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What is return on debt?

It is a metric used to measure credit risk, and is determined by dividing the net income of the property by the total outstanding principal of the debt.

What is debt service coverage ratio?

It is a metric used to measure the cash flow available to pay current debt obligations. It is determined by dividing net property income by total short-term debt service, and is expressed as a percentage. 

What is yield?

It is a metric used to measure the return on investment. It’s calculated using the net profit the property is generating divided by the cost of the project. It is expressed as a percentage. It can also be referred to as property yield.

What is cap rate?

It is a metric called capitalization rate used to measure the return on investment in a real estate property. This measure is calculated using the net profit that the property is generating divided by the market value of the property. It is expressed as a percentage.

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