In commercial real estate financing there are 3 important metrics that are critical to lenders when they decide to make a decision to fund an asset. In no particular order these metrics are: Debt Service Coverage Ratio (DSCR), Debt Yield (DY) and Loan-to-Value (LTV) – see metrics. Although there are many other metrics when valuating and financing real estate investment, the ones recently mentioned are the holy grail of managing inherent and unknown risks with debt financing. This piece of short article will not be a thesis about these aforementioned terms but rather a short overview to bring more light to another metric, Capitalization Rate (Cap Rate) that can be sometime overlooked in the decision making process when financing properties.
In real e...Read More