Yield-on-cost

Yield-on-cost — NOI divided by what you actually paid all-in (price + transaction friction + renovation), as opposed to the cap rate, which divides by market value. It’s the metric that below-market entry moves: a building worth ₱4M with ₱168k NOI is a 4.2% cap rate, but bought at ₱2.6M it’s a 6.5% yield-on-cost — same building, same rent; the discount created the return. Foreclosure investing (3.6) is the systematic pursuit of yield-on-cost above financing cost.

First used in: 3.1 · Leverage: the sword’s both edges