10 Commercial Estate Acronyms You Should Know

If you are planning to invest in commercial real estate, there are a few terms you absolutely must know before you begin. These terms – and their acronyms – are at the heart of every commercial real estate investment you will come across. The following is a compilation of some of the most used commercial real estate terms and their acronyms.

ROI – Return on Investment. ROI is the ratio which measure net profit versus the cost of the investment. The higher the ROI, the more profit you are making.

LOI – Letter of Intent. LOI is an acronym for letter of intent, which is a document expressing the intent of each party in a real estate agreement. It is not a legal binding contract, but helps to avoid misunderstandings between both sides.

CAM – Common Area Maintenance. CAM charges are the charges paid by the tenant for the upkeep of the property for use and benefit of all the tenants.

LTV – Loan-to-Value. LTV is a ratio used to asses lending risk that financial institutions and other lenders use to approve a mortgage. Loans assessed to have a high LTV are considered higher risk and therefore have a higher interested rate on the mortgage loan.

DCR – Debt Coverage Ratio. DCR measures the ability to pay the property’s monthly mortgage payments from the cash generated from renting the property.

NNN Lease – Triple Net Lease. A NNN lease is when the tenant typically pays a base rent plus an additional amount for property tax, insurance and maintenance costs.

NOI – Net Operating Income. NOI equals all revenue from the property, minus all reasonably necessary operation expenses. NOI is used to calculate the profitability of income-generating real estate investments.

USF – Usable Square Footage. USF is space you can actually occupy. Generally, hallways, stairways, bathrooms and storage rooms are not calculated in USF. However, if you rent an entire floor, then these areas may be included.

CMA – Comparative Market Analysis. CMA is the process of determining an investment property’s value by comparing it to other properties similar in size and amenities.

REIT – Real Estate Investment Trust. A REIT is a company who finances, owns, manages and operates income-producing investment properties.

About Cohen Commercial Realty, Inc.

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