Category: Tools

The operating expense ratio, sometimes called expense ratio or OER, is an important factor for all commercial real estate investors and property owners. It is a metric that compares the amount of income that a commercial property generates to the amount of money it costs to operate that property.

Why Does Operating Expense Ratio Matter?

The operating expense ratio helps show the cost to operate … Read More

Understanding the floor area ratio is important for commercial real estate investors. The metric is specifically important for developers looking to make the most use out of the property their commercial building will occupy. Here are some insights into what FAR is, how the floor area ratio formula works, how  and when it is used.

What Is Floor Area Ratio (FAR)?

The floor area ratio, … Read More

Commercial mortgages have numerous stipulations that help to protect the lender’s investment. One of those is a prepayment penalty called yield maintenance. Commercial lenders may use this type of penalty as a way to ensure they receive a profit from lending to the borrower.

What Is Yield Maintenance?

In commercial mortgages, yield maintenance is a type of fee paid by the borrower to the lender … Read More

Determining which rental property is worth your investment requires taking a careful look at various bits of data. Gross rent multiplier in real estate happens to be one of the most important factors you may wish to focus on – and the good news is there are many such metrics you can use to get a good idea of the value of any property.

First … Read More

Loan to Value Ratio Calculator: What’s Your LTV Ratio?

Loan to value ratio is a standard metric that lenders use to assess default risk and qualify commercial real estate loans. While it’s far from the only data point lenders consider, it’s one of the most basic and often checked early on during the loan application process.

What is a Loan to Value Ratio?

Loan to … Read More

The debt service coverage ratio (DSCR) offers a key but often misunderstood tool for all commercial real estate financing parties. For instance, investors may use this formula to adjust offers, track performance, calculate profit margins, and determine when they should obtain financing or seek to refinance. In contrast, lenders employ the figure during underwriting to decide if the property earns enough income to justify the risk.

Find … Read More

Real estate investors need information. The more information they have, the better the decisions they can make. There are a lot of tools to provide this information, but one of the most important is net operating income (NOI).  Understanding what this calculation is and how to use it can help investors make decisions quickly regarding any property an investor is considering.

What Is Net Operating … Read More

Cap Rate for Commercial Real Estate

Capitalization rates calculate the expected annual return on investment that commercial real estate properties will generate. Cap rates can show investors how much they might expect to receive from a particular property, and thereby provide a metric for evaluating the property.

Cap rates are often looked at by lenders when financing commercial property, this is one metric that … Read More

Debt yield hasn’t traditionally been a primary commercial real estate loan underwriting metric, but more lenders are incorporating it into their criteria. In the current real estate market, measuring debt yield ratios provides lenders with a stable assessment regardless of unusual or changing conditions.

What is Debt Yield?

Debt yield is a standardized way to measure net operating income (NOI) against total loan … Read More