Most Important Commercial Real Estate Terms You Must Know

Discover the most important commercial real estate terms you should know. Understanding this basic information is not only essential for analyzing every commercial investment accurately, but it also protects you from making bad decisions. Before investing in any commercial property, you must know these commercial real estate terms.

0:00 Basic Commercial Real Estate Terms
0:39 Building and Location Class
1:32 Gross Rental Income (GRI)
1:59 Vacany Factor
2:46 Effective Gross Income (EGI)
3:17 Operating Expenses (OpEx)
4:17 Net Operating Income (NOI)
5:18 Annual Debt Service (ADS)
6:05 Cash Flow
6:50 Commercial Real Estate Decision Making Terms
8:20 Cash on Cash Return (ROI)
9:34 Capitalization Rate (Cap Rate)
12:22 Debt Coverage Ratio (DCR)
15:07 Bonus: Actual vs Pro Forma Explained

[AbdulBayaz]

Hi Peter,
Very informative.
It’s always helpful. It’s never boring.
I always go back and forth between your different videos!!!

[pb]

I am entering into brokering commercial mortgages (apartment complexes/multi units) and find this to be an excellent way of learning how to understand the needs of my clients

[mercurymarauder]

You made a mistake on the 25% down payment is supposed be 20%down pymt, $120, 000 of $600, 000 equals 20%

[iycrra]

Stumbled upon your video in my feed and now I am a subscriber, and watching some of your videos. When you say 6.5% interest, is it interest only loan? I am wondering what type of loans you would recommend for Commercial Real Estate. Thanks and keep up the good work Peter!🙏

[kjwking]

Peter,
Thanks for the info and your time
Where do you account for property taxes and property insurance? Is they in the mortgage payment or in the expenses?

[dhammons]

You would have to raise the rents to $1560 each apartment to get $93600

[pillarcloud]

Thank you Peter for this priceless information.

[jacobhoke]

This helped me so much thank you would you say the same 35% rule for operating expenses applies to non commercial relistate like a 4 plex

[twgolf]

Great videos sir. Very easy to understand.

[tw]

Hi Peter

If you did not have an annual debt service and if the property had been purchased with cash you would have a greater cash on cash return than with ADS....also there are extra loan origination fees and other fees potentially not factored the advantage of a cash purchase would probably enable a stronger negotiation for the buyer....probably a lower purchase no future problems with refinancing a if you have cash how is it a better investment option to take on debt?

[losaeyang]

Thanks you professor. New subscriber here.

[texas]

Bought your book I’m getting my first commercial property built now.

[dannygarcia]

Excellent information. Thank you for your valuable content 🙏

[charleswarley]

Why do you think noi doesn’t apply to say, a four unit? A higher noi will always drive a higher price when an applied to a cap rate. Right?

[kaliymbarber]

good info ! but in section (5:37) 25% of 600 k is 150, 000 not 120 off by 30, 000, but still very good info

[eberg]

Hi Peter, There is a mistake. in your proforma you have 93, 600 as a result of raising the rents $50 a year. 1200 + 100 is 1300 x 5 is 6500 x 12 is 78k. So the math is a lot less inviting than you make it appear. Was this on purpose?

[vivianasantanarealestate]

You are amazing!!
Thank you so much ❤

[kenshofalco]

I definitely respect what you've accomplished Peter but I'm concerned commercial property is going to get hammered

[dhammons]

When you raise the rents $100 the new gri is $78, 000