The 5 Metrics Every Commercial Investor Must Track (Cap Rate + Beyond)

Subtitle: The dashboard gauges that keep your commercial portfolio flying safely.

✈️ The Cockpit Metaphor

Imagine piloting a jet with just one gauge. Scary, right?
That’s what investors do when they only watch cap rate.
To stay on course, you need five dials on your dashboard.

1. Cap Rate – The Altimeter

• Tells you how “high” the deal is flying (valuation vs. NOI).
• Formula = NOI ÷ Value.
• Good for comparing deals quickly.
• Limitation: Doesn’t account for financing.

Scenario: A retail strip with 9% cap looks great — until you realize 40% vacancy is propping it up.

2. Cash-on-Cash Return – The Fuel Gauge

• Measures the return on your actual cash invested.
• Formula = Annual Cash Flow ÷ Cash Invested.
• Critical for leverage-heavy deals.

Scenario: Two properties have same cap rate. But one gives you 12% cash-on-cash because you put less down → more efficient fuel use.

3. Debt Service Coverage Ratio (DSCR) – The Engine Temp

• Formula = NOI ÷ Debt Payments.
• Banks look for 1.25+ DSCR.
• If DSCR < 1, engine is overheating (not enough NOI to cover debt).

Scenario: An industrial warehouse with DSCR of 0.9 looks like a crash waiting to happen.

4. Internal Rate of Return (IRR) – The Flight Path

• IRR = long-term total return including time value of money.
• Captures refinance, resale, and equity buildup.
• Think of it as your navigation system showing where you’ll land.

Scenario: Two office deals show same 8% cap. But the one with stronger rent growth projects 15% IRR vs 10% — better flight path.

5. Occupancy & Tenant Mix – The Cabin Pressure

• High occupancy = steady cash flow.
• Diverse tenant mix = resilience against shocks.
• Losing one anchor tenant can depress value overnight.

Scenario: A “stable” 95% occupied mall crashes when the anchor leaves. Cabin depressurized.

🧠 Investor’s Lesson

• Cap Rate = Altimeter.
• Cash-on-Cash = Fuel Gauge.
• DSCR = Engine Temp.
• IRR = Flight Path.
• Occupancy/Tenant Mix = Cabin Pressure.

👉 Together, these five gauges let you fly your commercial deals safely, profitably, and with confidence.

📣 Call-to-Action

👉 Ready for a plug-and-play Investor Dashboard Template that tracks all five metrics?
Download it free at SubjectToDeals.com/Commercial