The CRE Glossary
Plain-English definitions of the commercial real estate terms that show up in deals, written by a practitioner, worked on real numbers. Every term below is taught in full inside the courses.
CAM Charges and Expense Recoveries · CapEx · Cap Rate · CFAT · CFBT · Cash-on-Cash Return · DSCR · EGI · Gross Lease vs. Net Lease · GPI · GRM · LTV · NOI · OER · Price Per Unit and Price Per Square Foot · Rent Escalations · The Due Diligence Documents You’ll Hear Named · Title, Encumbrances, and Clear Title
CAM Charges and Expense Recoveries
In multi-tenant properties — office buildings, retail centers, industrial parks — Common Area Maintenance (CAM) charges allow the landlord to recover the cost of shared spaces and services from tenants.
Full explanation: CAM Charges and Expense Recoveries → →
Capital Expenditures (CapEx)
Capital expenditures are dollars spent on major, non-recurring improvements to a property — a new roof, an HVAC replacement, parking lot resurfacing, structural work — as distinct from the routine repairs and maintenance already sitting inside Operating Expenses.
Full explanation: NOI to Cash Flow Waterfall Calculator → →
Capitalization Rate (Cap Rate)
The capitalization rate — universally called the cap rate — is the return a property would generate if purchased with all cash (no mortgage).
Full explanation: Capitalization Rate (Cap Rate) → →
Cash Flow After Tax (CFAT)
CFBT doesn’t account for taxes — it’s the cash in the bank before the investor’s own return is filed. Cash Flow After Tax (CFAT) is what’s actually left once income tax is paid on that cash flow.
Full explanation: NOI to Cash Flow Waterfall Calculator → →
Cash Flow Before Tax (CFBT)
NOI is the property’s income before financing. Cash Flow Before Tax (CFBT) is what the investor actually receives in their bank account after paying the lender.
Full explanation: Cash Flow Before Tax (CFBT) → →
Cash-on-Cash Return
Cash-on-cash return (CoC) measures the annual cash income generated by a property relative to the equity invested.
Full explanation: Cash-on-Cash Return → →
Debt Service Coverage Ratio (DSCR)
Debt Service Coverage Ratio (DSCR) measures whether a property generates enough NOI to cover its loan payments with room to spare.
Full explanation: Debt Service Coverage Ratio (DSCR) → →
Effective Gross Income (EGI)
Start with GPI — the theoretical ceiling — and then subtract reality. That’s Effective Gross Income, or EGI.
Full explanation: Effective Gross Income (EGI) → →
Gross Lease vs. Net Lease
A commercial lease defines who pays which expenses. The two poles of the spectrum are gross leases and net leases — and everything in between.
Full explanation: Gross Lease vs. Net Lease → →
Gross Potential Income (GPI)
Every CRE analysis starts at the top of the income statement with one question: if every unit in this property were leased at full market rent, with zero days of vacancy, how much money would come in each year? That theoretical maximum is called Gross Potential Income, or GPI.
Full explanation: Gross Potential Income (GPI) → →
Gross Rent Multiplier (GRM)
The Gross Rent Multiplier (GRM) is a quick-and-dirty valuation tool — a first filter to determine whether a property’s asking price is in the right ballpark before you do deeper analysis.
Full explanation: Gross Rent Multiplier (GRM) → →
Loan-to-Value (LTV)
Loan-to-Value (LTV) is the ratio of the loan amount to the appraised value of the property.
Full explanation: Loan-to-Value (LTV) → →
Net Operating Income (NOI)
Net Operating Income — NOI — is the single most important metric in commercial real estate. If you understand only one number from this course, it is this one.
Full explanation: Net Operating Income (NOI) → →
Operating Expense Ratio (OER)
The Operating Expense Ratio (OER) tells you what percentage of a property’s gross income is consumed by operating expenses.
Full explanation: Operating Expense Ratio (OER) → →
Price Per Unit and Price Per Square Foot
Two properties selling for $3,000,000 each are not comparable unless you know what you’re buying per unit. Enter price per unit and price per square foot — the normalized benchmarks professionals use to compare deals instantly.
Full explanation: Price Per Unit and Price Per Square Foot → →
Rent Escalations
Long-term commercial leases almost always include rent escalation provisions — scheduled increases in base rent over the lease term. How those escalations are structured directly affects the property’s NOI growth and, therefore, its value.
Full explanation: Rent Escalations → →
The Due Diligence Documents You’ll Hear Named
Beyond title, every commercial acquisition involves a short list of due diligence documents. As a beginner, your job is to recognize each one, know what risk it addresses, and know to order it. The deep mechanics of each are covered in I2: Due Diligence.
Full explanation: The Due Diligence Documents You’ll Hear Named → →
Title, Encumbrances, and Clear Title
Title is legal ownership. When you purchase commercial real estate, you receive a deed that transfers title from the seller to you. But title can come with strings attached — encumbrances — and identifying them before closing is critical.
Full explanation: Title, Encumbrances, and Clear Title → →
Educational definition only. Not investment, financial, or brokerage advice.