Financial Analysis · Reference Card
CRE Metrics & Formulas Cheat Sheet
This is the formula card you keep next to your underwriting model: the 15 numbers that every commercial deal comes down to, each with its plain-text equation, what it actually tells you, and a Florida benchmark range. Use it to recalculate a broker's OM before you trust it, to size a loan in your head before you call a lender, and to sanity-check any asking price in seconds. It is a reference, not a substitute for full underwriting — pair it with the deal-level checklists below when you take a property to LOI.
Pro Tip
Never read a single metric in isolation — they only make sense in pairs. Cap rate above your interest rate means positive leverage (cash-on-cash beats the cap rate); cap rate below it means negative leverage that quietly eats the deal. And a high IRR with a 1.2x equity multiple is a fast deal that made you almost nothing, while a 15% IRR at 2.5x made you real money slowly. The metric that matters most isn't the cap rate — it's the quality of the NOI underneath it, which is usually 10–20% lower than the number on the OM once you add a real management fee, reserves, and post-sale taxes.
1. Valuation & Return
Cap Rate
FL 2026: 4–5% trophy/IG tenant, 5–6.5% solid markets, 6.5–8% secondary, 8%+ means risk or a problem.Cap Rate = NOI / Purchase Price
The unlevered, pre-tax, first-year yield — your starting point to qualify a deal, not your actual return.
Value (reverse cap)
Use the cap rate the market is actually trading at, not the broker's marketed cap.Value = NOI / Cap Rate
Back into what a property is worth at a given cap rate — the fastest way to sanity-check any asking price.
Cash-on-Cash Return
Stabilized NNN 5–7%, stabilized multifamily 5–8%, small industrial 6–9%.Cash-on-Cash = (NOI − Debt Service) / Total Cash Invested
The first-year levered yield that actually hits your bank account; count every dollar out of pocket, not just the down payment.
IRR
FL 2026: stabilized NNN 8–12%, stabilized multifamily 10–14%, value-add 15–20%, opportunistic 18–25%, development 20–30%.IRR = the discount rate at which NPV of all cash flows = 0 (use =XIRR())
The time-weighted annualized return over the full hold — how fast you made money.
Equity Multiple
Stabilized NNN 1.5–1.8x, value-add 1.8–2.2x, opportunistic 2.0–3.0x.Equity Multiple = Total Cash Returned / Total Cash Invested
How much money you made in total (cash flow + sale), ignoring time — the reality check on a flattering IRR.
Gross Rent Multiplier (GRM)
Central FL small multifamily 9–12; strong submarkets 11–14; older/weaker stock 6–9.GRM = Purchase Price / Gross Annual Rent
A two-number quick screen for small multifamily — ignores all expenses, so never use it to make a decision.
Price per SF / per Unit
Comp only against same-submarket, same-vintage sales; never use as a final valuation.Price per SF = Purchase Price / Building SF | Price per Unit = Purchase Price / Units
Quick-and-dirty comps for screening against recent sales — blind to income, age, and condition.
2. Income & Expense
NOI
Your recalculated NOI is usually 10–20% below the broker's — that lower number is the one you offer on.NOI = Effective Gross Income − Operating Expenses
The number that drives cap rate, value, loan size, and returns; excludes debt service, taxes, depreciation, and CapEx.
Effective Gross Income (EGI)
Always net out vacancy first; vacant units enter GPI at market rent, not zero.EGI = Gross Potential Income − Vacancy & Credit Loss + Other Income
The realistic top line — actual collectible cash, not the theoretical fully-leased ceiling.
Operating Expense Ratio
Multifamily 35–50%, multi-tenant retail 25–40%, NNN retail 5–15%, industrial NNN 10–20%.Expense Ratio = Operating Expenses / Effective Gross Income
The #1 sanity check on whether an OM is lying about NOI — too low means reserves or management were stripped out.
Vacancy & Credit Loss
Multifamily 5–8% (8–12% Class C), retail/industrial 5–10%, FL office 10–20% in 2026.Vacancy & Credit Loss = GPI × Vacancy Rate (+ ~1–2% credit loss)
The slice of potential rent you will not collect; underwrite to the submarket, not to the seller's number.
Break-Even Occupancy
Want it well below in-place occupancy; ~73% break-even vs. 95% occupied is a healthy margin.Break-Even Occupancy = (Operating Expenses + Debt Service) / Gross Potential Income
The minimum occupancy needed to cover expenses and the mortgage — the gap to current occupancy is your cushion.
Rent per Square Foot
Always confirm the lease basis (NNN vs. gross) before comparing two PSF rents.Rent PSF = Annual Base Rent / Square Feet
The only apples-to-apples way to compare rents across sizes and benchmark against market data.
3. Debt & Financing
DSCR
Lender minimums: 1.25 multifamily/NNN, 1.30–1.40 office/retail, 1.40–1.50 hospitality.DSCR = NOI / Annual Debt Service
How much NOI covers each dollar of mortgage payment — usually the binding loan-sizing constraint in a high-rate market.
LTV
Max ~70–75% conventional, 75–80% agency multifamily, 85–90% SBA; sweet spot 60–75% with positive leverage.LTV = Loan Amount / Value (or Purchase Price, whichever is lower)
The share of the purchase the lender finances; more leverage amplifies both wins and wipeout risk.
Debt Yield
Institutional/CMBS 8–10% minimum, agency multifamily 7–8%.Debt Yield = NOI / Loan Amount
The cleanest, rate- and leverage-agnostic measure of loan risk — what yield the loan balance would produce in a foreclosure.
Loan Constant
~8.1% at 6.5% over 25-yr am. Max Loan = (NOI / DSCR) / Loan Constant.Loan Constant = Annual Debt Service / Loan Amount
The annual cost of debt as a percent of balance; higher than the rate because it includes principal — use it to size loans in your head.
Loan-to-Cost (LTC)
Bridge/value-add 75–80% LTC; ground-up construction 65–75% loan-to-cost.LTC = Loan Amount / Total Project Cost (purchase + renovation + soft costs)
The leverage measure bridge and construction lenders size to, versus LTV for permanent lenders.
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