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Mukesh Valabhji - Commercial Real Estate Investing Terms


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Mukesh Valabhji - Commercial Real Estate Investing Terms - Some basic names, numbers, and equations you will want to know is you want to be a commercial property investor. Visit to read about the Singapore market.

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Mukesh Valabhji - Commercial Real Estate Investing Terms

  1. 1. Commercial Real Estate Investing Terms Successful commercial real estate investing is all about the numbers. In order to evaluate and analyze a commercial real estate investment, you should know and understand a few important terms and equations. Having this knowledge can increase your confidence and help you to understand and hold your position in negotiations.
  2. 2. Here are some basic names, numbers, and equations you will want to know: TERMS Cap Rate / Capitalization Rate: a measure of a property's performance without considering the mortgage financing. NOI / Net Operating Income: the amount that's left over after you collect all your income and pay out your operating expenses CCR / Cash-on-Cash Return: how much return you are getting on the money you invested Gross Income: all of your income from the property (includes rents, late fees, laundry/vending machines, etc.) Effective Gross Income: anticipated income after deducting an estimated amount for vacancies, bad debt, etc. Operating Expenses: includes taxes, insurance, utilities, maintenance, supplies, etc.
  3. 3. Debt Service: total of annual costs in principal, interest and charges related to the mortgage. Vacancy Rate: percentage of units in a building without tenants EQUATIONS Cap Rate / Capitalization Rate: NOI ÷ sales price = Cap Rate NOI / Net Operating Income: EGI -Operating Expenses = NOI CCR / Cash-on-Cash Return: Annual Cash Flow ÷ Initial Cash Investment = CCR Gross Income: Rents + Fees + Other Property Income = Gross Income Effective Gross Income: Gross Income – Vacancy Allowances = EGI
  4. 4. Operating expenses: Taxes + insurance + Maintenance + Supplies + Utilities + Other Operational Costs = Operating Expenses Debt Service: Monthly Principal + Interest Charges x 12 = Debt Service Vacancy Rate: Number of Vacancies ÷ Number of Units = Vacancy Rate To learn about one of the hottest markets for commercial real estate investing click here.