Commercial real estate (or CRE) is a property used exclusively for business or workplace purposes or to generate CASH FLOW for the owner or lessee.
Property's profitability after deducting expenses.
Plays a crucial role in assessing a property's value.
Prominently featured on your income statement.
FORMULA NOI = gross operating income of a property – operating expenses
Expresses an investor's annual return as a percentage.
Investment profitability based solely on net operating income, excluding financing and taxation.
FORMULA Cap rate = Net Operating Income (NOI) / Property's Market Value or Sales Price
Property's profitability after deducting expenses.
Plays a crucial role in assessing a property's value.
Prominently featured on your income statement.
The annual cash flow is the amount of money that is moved in and out of the company per year.
FORMULA Annual Cash Flow = NOI – debt service
The cash-on-cash return is the ratio of annual cash flow before tax to the total cash invested in the property.
FORMULA Cash-on-Cash Return = Annual cash flow / down payments
Price of rent for commercial real estate is typically discussed per square foot.
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