Yield

Definition

Yield measures the actual return an investor earns on a real estate investment, considering both income (rent) and changes in value. It differs from the stated interest rate or cap rate because it accounts for the specific price paid, financing terms, and holding period. In mortgage lending, yield refers to the effective return the lender earns, which may exceed the note rate when discount points are charged at closing. One discount point (1% of the loan amount) typically increases the lender's yield by approximately 1/8 of a percentage point.