Browse Tag: Gross Rent Multiplier

Brendan Erickson Of REI Wise: Financial Analysis for Commercial Assets

Like a lot of industries, the commercial real estate business has its own alphabet soup.  It’s laden with acronyms and jargon that practitioners need to communicate, peppering speech, documents and articles with shorthand that can make the business look a lot more complicated than it commonly is.  What’s ironic is the jargon itself is there to make communication easier and faster, even if it has the opposite effect to the newcomer.  You could say that apartment building has a 8% nonleveraged rate of return or you could say it has an 8 cap.  Either way, you’re saying the same, even longer, thing: given a set of key assumptions about tenancy and expense and rents, the net income headed to that building’s owner amounts to eight cents a year for every buck she scraped up, borrowed and handed over to buy it.  

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