14 Commercial Real Estate Terms Every Investor MUST Know

Commercial real estate terms can be hard to understand, even as a residential real estate investor. You may get on a call with a commercial real estate broker, only to have the faintest idea of what they’re trying to tell you. Terms like DSCR, cap rate, and triple net are often brand new terms to those just getting started in commercial real estate. But don’t let the jargon scare you, these terms are actually quite simple when you know what they mean.
Tyler Cauble felt this jargon-induced headache early on in his commercial investing career. Since then, he’s become fluent in CRE-speak and is able to quickly tell you exactly what different underwriting, lease, and property terms mean. Don’t start off your commercial real estate investing journey on the wrong foot. Let Tyler walk you through fourteen of the most common commercial real estate terms so you not only look smarter but invest smarter.
Have any other terminology you’re perplexed by? Let us know in the comments below, we’ll try our best to give you a digestible definition!
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Commercial Real Estate Vocabulary 101 - Part 1:
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Everything You Need to Know About Triple Net Leases:
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The Newbie’s Real Estate Dictionary:
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@commercial_in_nashville Or / commercial_in_nashville
00:00 Explaining the CRE Jargon
00:54 The Language of Commercial Real Estate
01:18 1. Net Operating Income (NOI)
01:48 2. Debt-Service Coverage Ratio (DSCR)
02:47 3. Capitalization Rate
03:54 4. Return on Investment (ROI)
04:31 5. Commercial Cash-Out Refinance
04:59 6. Price Per Sqft/Unit
06:05 7. Building Classification
07:25 Commercial Lease Terms
07:37 8. Triple Net Lease (NNN)
08:25 9. Full Service Gross (FSG)
09:04 10. Modified Gross Lease (MG)
09:42 Lease Clauses
09:55 11. Sublease Clause
10:33 12. Exclusivity Clause
11:14 13. Rent Escalation Clause
11:47 14. Delivery Conditions

[@Joe_Foley]

*Correction* NOI = Effective Gross Income - OpEx. In the video (1:28), you stated that NOI = Gross Rental Income - OpEx.
EGI includes a vacancy factor while GRI does not. To accurately and safely underwrite a property, make sure to factor in a vacancy rate of at least 5%.

[@jacobfloyd6929]

Great beard… I trust him

[@TylerCauble]

Haha it’s all in the beard!

[@jillyanmacmorris5176]

This was so helpful and understandable. Appreciate the calm, kind spirit you bring! I enjoy listening to this kind of video!!

[@nicolasvalenzuela6265]

I enjoyed the video, clear in the explanation and was able to caught my attention for the whole vídeo

[@TheQuarterbackX]

Wow. I thought I would be familiar with most of the terms, but turned out I hardly knew any of them. Only knew maybe two or so out of the whole bunch. Since, I had to watch multiple times and sure I wanted to watch multiple times more.

[@TylerCauble]

It needs its own dictionary! Haha

[@chinoguarcas4205]

Great video, I'm gonna save it so I can watch it over and over

[@TylerCauble]

There we go! 🤙🏼

[@katymcdowell1]

Great video
Thank you

[@beauty4u132]

Thank you so much !

[@kjohri]

Great video..clear, concise and to the point.

[@TylerCauble]

Boom! Appreciate that

[@thekingdomofelelyonprayer]

THANK YOU

[@soyourrealtor]

Amazing help

[@surn6551]

Excellent

[@AkshayMmeledath]

nice video

[@TylerCauble]

Thank you, Akshay

[@bryzon559]

ROI can also stand for retail office industrial. This is great content and very helpful. I am new to CRE and am an assistant to an appraiser so this is all perfect for me to learn. Thank you!

[@TylerCauble]

I’m glad you enjoyed it!

[@ryanwalsh3966]

Me and a couple of my veteran buddies are in Clarksville Tennessee looking to get into commercial real estate. Is there any chance that You would be willing to mentor? And I don’t mean something for nothing

[@teslarex]

Great overview!

[@Walina-gv9ph]

Cap rates are not a return. Cap rates measure value. The formula is V=i/r In a 5 cap market investors have paid $20 for NOI. In a 10 cap market they paid $10. Where is the "return"? You are misinforming people.

[@Joe_Foley]

The “return” is shown if you treat it like you paid for the property in full. For example, if the NOI is $100K and the Purchase Price is $1M, the cap rate would be 10%. This would mean that if you paid for the property in full ($1M in cash), your “return” would be 10% annually since it would take 10 years to make back your investment of $1M.
It looks like you are misinformed…

[@Walina-gv9ph]

@@Joe_Foley Cap rates NEVER include financing! They measure what investors HAVE paid for NOI. How would you know if a property was bought with cash or not? Geez. Now you are saying cap rates measure time!!!
Here's a question I'd like to see you try to answer, where are you getting the value to calculate a cap rate?

[@Walina-gv9ph]

@@Joe_Foley
1. A cap rate is not a return metric.
2. The cap rate is a valuation metric.
3. The cap rate is the same if you pay cash or finance 100%.
4. Cash on Cash is a return metric.
5. If you do not use leverage then the CoC return will be the same as the cap rate by happenstance.
6. But they measure different things.
7. The cap rate will measure the value of NOI. V=i/r is the formula.
8. If you buy $1 NOI at 5% cap rate you paid $20. If you bought at a 10% cap rate you paid $10.
9. f you use cap rates incorrectly and pay $20 in a $10 market then your cash on cash without leverage is 5%. BUT you overpaid by double!!! Still think you will be getting a 5% CoC return?
10. NOPE!