Neal Zeavy, a serial entrepreneur based in Seattle, Washington, serves as an angel investor and co-owner of Nic’s Organic Fast Food, the nation’s first certified organic fast food restaurant. Beyond this, Neal Zeavy also serves as the president of NZ Consulting, a raffle fundraising consulting business, and of Zeavy Development, a commercial real estate development and investment company with properties in states such as Illinois, Virginia, Missouri, and Maryland.
When investing in real estate, there are multiple financial metrics that investors will come across. One of the most common metrics used in commercial real estate investing is net operating income (NOI). This metric is an essential part of real estate investments since it includes the total annual income generated by a property, including rent, parking, and laundry. The property’s operating expenses are subtracted from this income, which gives investors an idea of how much a property generates after operating costs are covered.
The capitalization, or cap, rate is another common metric in commercial real estate investment. Responsible for determining the value of an income-producing property, the cap rate is created by dividing annual NOI by the current value of the property. Investors use this metric to find a good average between nearby properties and to figure out what their potential returns will be in the future. Normally, investors prefer high cap rates since they are associated with higher returns on investment.
Finally, there is the cash on cash return (CoC) metric. One of the easiest metrics to generate, CoC, also shortened as CCR, measures the ratio between the down payment of a property and its annual cash flow. With the CoC metric, investors can project the return on their investment.
