Underwriting Standards & Calculation Formulas
All financial models and tools on CRE Calculators adhere to standard commercial real estate underwriting principles and institutional lender formulas.
Core Formulas & Financial Definitions
Cap Rate = (NOI / Purchase Price) × 100%
Measures unleveraged initial yield of a property based solely on property NOI and acquisition price.
NOI = Gross Potential Income - Vacancy Loss + Other Income - Operating Expenses
Operating expenses include property taxes, insurance, management fees, and routine maintenance, but exclude debt service payments and capital expenditures (CapEx).
DSCR = Annual NOI / Annual Debt Service
Key underwriting metric used by commercial lenders. Standard bank requirements mandate DSCR ≥ 1.20x to 1.25x.
Cash-on-Cash = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100%
Calculates the ratio of annual pre-tax cash flow received relative to the total initial equity invested (down payment plus closing costs).
Authoritative Data Sources & Reference Links
Market cap rate benchmark ranges and commercial underwriting parameters are compiled from official research publications and data endpoints:
Tier 1-4 US Metro Cap Rates (Published H2 2025 / 2026)
Multifamily, Industrial & Retail Sector Yield Reports
SOFR Benchmark Rates & Treasury Yield Spreads
Standard DSCR Coverage Benchmarks (1.20x-1.25x)