Underwriting Standards & Calculation Formulas
All financial models and tools on CRE Calculators adhere to standard commercial real estate underwriting formulas and explicit mathematical definitions.
Core Formulas & Financial Definitions
Cap Rate = (NOI / Purchase Price) × 100%
Measures unleveraged initial yield of a property based solely on stabilized annual 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 cash-flow coverage metric used by commercial lenders. Many conventional lending programs reference DSCR ≥ 1.20x to 1.25x as a baseline guideline.
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 and initial reserves).
Public Research Portals & Reference Links
While all default values and scenario tables on this site are illustrative educational assumptions, investors researching current market conditions can consult the following public industry research portals and official rate releases:
Publicly published metro market survey portal and capitalization rate research
Multifamily, industrial, office, and retail sector research publications
Official U.S. Treasury yield and benchmark interest rate releases
Multifamily underwriting guidelines and DSCR coverage documentation