Let’s kick off by acknowledging the unavoidable fact that commercial real estate investing is both complex and requires an in-depth knowledge base before you can navigate it smartly.

Although this article will provide insight to two effective instruments for evaluating a good investment, it must be expressed that there are many other approaches that should also be considered. However, and to keep things light, if buyers/investors can understand essential financial metrics like “cap rates” and “cash-on-cash” returns, they will be far better at making informed decisions. Whether you’re a seasoned investor or just entering the market, these two metrics should always be utilized when establishing the profitability and potential of a commercial property.

Cap rates

A “cap rate” is an abbreviation of the term “capitalization rate” and it is a fundamental tool used by investors and brokers to evaluate the profitability of an income-producing property. Just note that if a property is not generating income (rent) then this approach can not be applied or would yield a 0% cap rate. That said, the cap rate represents the rate of return, or ROR, for a property based on it’s income relative to it’s purchase price.

Fortunately, it’s very simple to calculate and most folks with a calculator can perform this task quickly. Simply divide the property’s net operating income, or NOI, by its current market value or purchase price. As a quick example: If a property generates $100,000 in NOI annually and is valued at $1 million, the cap rate would be 10% ($100,000 / $1,000,000).

OK, great! We have a 10% cap rate! Is that good? That depends on the investor’s risk tolerance. As an unofficial guide, a lower cap rate (1%-6%) tends to mean the property is more secure (long-term lease, corporate-backed tenant, etc.) whereas a higher cap rate (7% or more) indicates that there is typically more inherent risk (history of high lease turnovers, unsecure tenants, slow rents, etc.). Investors should have established risk tolerances before applying an appropriate cap rate to commercial real estate property evaluations.

Vincent Campana (Courtesy photo)

The role of cap rates:

  • Risk assessment: Higher cap rates typically indicate higher risk, such as properties in less desirable locations or those requiring significant management.
  • Market comparison: Investors use cap rates to compare similar properties on the market.
  • Valuation tool: Cap rates can also be used to estimate the value of a property based on its income potential. If you rearrange the cap rate equation, investors can better determine the maximum price they should/would pay for a property to achieve their desired return.

Cash-on-cash evaluation

Understanding how cap rates provide a snapshot of a property’s income relative to its value, it is also wise to implore a “cash-on-cash” evaluation. Cash-on-cash dives deeper into the actual cash flow an investor receives versus their initial investment. This calculation method focuses on the cash income generated by the commercial property compared to the investor’s initial cash investment. To calculate a cash-on-cash return, grab your calculator and divide the property’s pre-tax cash flow (the net operating income without the debt service) by the initial cash investment (the down payment and closing costs).

As an example, if an investor puts down $100,000 in cash and the property generates $10,000 in annual cash flow after expenses and mortgage payments, then the cash-on-cash return would be 10% ($10,000 / $100,000)! On paper, a 10% return on investment would be appealing to most folks, but just like the cap rate approach, it is only a piece of the overall puzzle when evaluating a property’s profitability for investors.

Value assessment: Cash-on-cash offers a clearer path for understanding a property’s profitability.

Valuation tool: Investors often use cash-on-cash returns to evaluate different financing options and/or to compare the profitability of real estate investments with other assets.

Commercial real estate brokers should be well-versed in guiding investors through the complexities of cap rates and cash-on-cash evaluations. These methods are key insights with analyzing properties, and investors should be ready to ask their broker for these evaluations when discussing investments.

In the world of commercial real estate investment, understanding cap rates and cash-on-cash returns is arguably indispensable. In a perfect world, a knowledgeable broker-and-investor combo should be able to navigate the waters of commercial real estate investing shrewdly if they are well-versed in these evaluation metrics.

Cap rates and cash-on-cash approaches cannot be solely depended upon to evaluate an investment, but in the many years of aiding buyers/investors, I’ve personally never seen them not both used prior to an acquisition.

If none of this makes sense, it’s OK. That is why we encourage all who want to invest in property to consult an experienced broker about these matters. Knowing these methods exist is half the battle!

Vincent A. Campana III is an associate broker at Campana Waltz Commercial Real Estate West. For more info, visit campanawaltz.com.

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By Pat Graham, AP Sports Writer

From Simone Biles to Sha’Carri Richardson and Diana Taurasi to Katie LedeckyTeam USA will provide some of the biggest star power at the 2024 Olympic Games.

And it will be the women leading the way as the U.S. looks to top the overall medal table for the eighth consecutive Summer Games.

FILE – Sha’Carri Richardson, of the United States, celebrates after winning the gold medal in the final of the Women’s 100-meters during the World Athletics Championships in Budapest, Hungary, Aug. 21, 2023. (AP Photo/Petr David Josek, File)

The nearly 600 athletes going to the Paris Olympics include more than 250 returning Olympians and 122 Olympic medalists. Golfers Xander Schauffele and Nelly Korda, along with surfer Carissa Moore, are among the numerous Olympians set to defend their titles in France.

It’s a loaded U.S. roster where the women outnumber the men 314 to 278 — at last count — and ages range from 16 to 59. The most decorated member of Team USA in Paris will be Ledecky, who’s trying to add to her collection of 10 medals (seven golds).

Comebacks and redemption

Biles is back in action after pulling out of multiple gymnastics finals in Tokyo to protect her mental health and safety. There’s Richardson making her Olympic debut after a much-debated absence three years ago because of a positive marijuana test.

The 27-year-old Biles leads a U.S. women’s gymnastics team filled with familiar faces and looking for redemption in Paris. The team settled for silver three years ago behind the Russian athletes competing as the Russian Olympic Committee.

2024 U.S. Olympic Team Trials - Gymnastics - Day 4
Simone Biles celebrates as she is announced as a member of the Olympic Team on Day Four of the 2024 U.S. Olympic Team Gymnastics Trials at Target Center on June 30, 2024 in Minneapolis, Minnesota. (Photo by Elsa/Getty Images)

Richardson has become a media sensation for her speed, charisma and perseverance. The 100-meter world champion earned a spot for Tokyo in 2021 but was banned following her positive test for marijuana. It sparked an intense debate about whether she was being unfairly singled out for taking a substance that doesn’t improve performance.

The 24-year-old Richardson, who graces the cover of Vogue magazine, said she was “overwhelmed with the emotions of just joy” after making the team.

Star power on the court

On the court, hoops royalty LeBron James and Taurasi lead their teams. And it’s no surprise that the men’s and women’s basketball squads brimming with talent are heavy favorites to bring home the gold.

United States forward LeBron James watches play from the bench during the second half of an exhibition basketball game against Canada, Wednesday, July 10, 2024, in Las Vegas. (AP Photo/Steve Marcus)
United States forward LeBron James watches play from the bench during the second half of an exhibition basketball game against Canada, Wednesday, July 10, 2024, in Las Vegas. (AP Photo/Steve Marcus)

James, Joel Embiid, Kevin Durant and Steph Curry join forces to lead a U.S. contingent going for a fifth straight Olympic title. A’ja Wilson, Brittney Griner and Taurasi headline a women’s squad that has won seven consecutive Olympic gold medals. Taurasi has been a part of five of them.

FILE - Kevin Durant poses for a photo with his gold medal during the medal ceremony for basketball game at the 2020 Summer Olympics, Aug. 7, 2021, in Tokyo, Japan. (AP Photo/Eric Gay, File)
FILE – Kevin Durant poses for a photo with his gold medal during the medal ceremony for basketball game at the 2020 Summer Olympics, Aug. 7, 2021, in Tokyo, Japan. (AP Photo/Eric Gay, File)

Who else is on the Team USA roster?

Decorated swimmers Ledecky and Caeleb Dressel are on deck to shine again in the pool, and majors winners and world No. 1 golfers Scottie Scheffler and Korda take to the links.

FILE - Katie Ledecky swims during a Women's 800 freestyle preliminary heat, June 21, 2024, at the US Swimming Olympic Trials in Indianapolis. (AP Photo/Michael Conroy, File)
FILE – Katie Ledecky swims during a Women’s 800 freestyle preliminary heat, June 21, 2024, at the US Swimming Olympic Trials in Indianapolis. (AP Photo/Michael Conroy, File)

“We’re telling these stories — we’re laughing, we’re crying, we’re cheering them on,” said Lyndsay Signor, senior vice president of consumer engagement at NBC Sports. “So that really warrants both the combination of the athletes themselves and the celebrities we’ve partnered with.”

NBC has been airing promotional Olympic material around the clock. There’s Biles being interviewed by singer SZA. Other athletes featured in spots include Richardson, sprinter Noah Lyles, 400-meter hurdles world-record holder Sydney McLaughlin-Levrone, Ledecky and reigning Olympic all-around gymnastics winner Suni Lee.

The U.S. women’s soccer team, led by new coach Emma Hayes, chases after its first Olympic gold since 2012 and Victor Montalvo — “B-Boy Victor” — will be a contender when breaking makes its Olympic debut in Paris. Coco Gauff is among the favorites to bring home a medal on the clay courts at Roland Garros, the site of the French Open.

Medal forecast

That abundance of star power is why Nielsen’s Gracenote forecasts the U.S. hauling in 123 medals. That’s ahead of China (87), Britain (62) and France (56). This could be the eighth straight Summer Games where the Americans have topped the medal table.

“If American athletes win, that drives ratings and endorsements, and makes it attractive for American corporations to invest in the Olympic movement,” said Dr. Yoav Dubinsky, an instructor of sports business from the Lundquist College of Business at the University of Oregon. “All part of the story of American lifestyle. Their successes, and at times failures or adversities, contribute to Brand America.”

Olympic entertainers

NBC brought in Academy Award-winning director Steven Spielberg to narrate a short film titled, “Land of Stories,” where the Olympics set a scene to tell tales.

Even more stars will participate in the network’s coverage as celebrities Snoop Dogg, Kelly Clarkson, Peyton Manning, Colin Jost, Leslie Jones and Jimmy Fallon make appearances.

Play entertainer, Snoop Dogg gets a pole vault lesson during the U.S. Track and Field Olympic Team Trials Sunday, June 23, 2024, in Eugene, Ore. (AP Photo/Charlie Neibergall)
Play entertainer, Snoop Dogg gets a pole vault lesson during the U.S. Track and Field Olympic Team Trials Sunday, June 23, 2024, in Eugene, Ore. (AP Photo/Charlie Neibergall)

Snoop already is trotting out his tracksuits to get in some work. The 52-year-old hip-hop star ran a 200-meter race against Ato Boldon and Wallace Spearmon at the Olympic track trials in Eugene, Oregon, last month.

His time was 34.44 seconds. Usain Bolt’s world record of 19.19 remains safe.

“(Snoop) has really brought a perspective that’s not only fun and interesting,” Signor said, “it’s lovable as well.”

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Sixty years ago, the Republican Party at its 1964 National Convention nominated conservative Arizona Sen. Barry Goldwater as its presidential candidate, and I was there.

The party’s 2024 convention this week brought back memories of the earlier event.

The Cow Palace in San Francisco on July 13-16 saw the culmination of a battle between Goldwater — “Mr. Conservative” and his ultra conservatives — and Gov. Nelson Rockefeller of New York, a political moderate.

At the end of the primary nominating season, Goldwater was the leader. Rockefeller’s followers — the party’s anti-Goldwater faction — and others got together before and during the convention to nominate Gov. William Scranton of Pennsylvania in a last ditch effort to block Goldwater.

I got to the convention in an unusual way. Near the close of my sophomore year at William & Mary, I signed to take a course, called political parties, for the fall 1964 semester. It was to be taught by professor Warner Moss, head of the school’s government department.

My grandfather, W. W. Kale, a prominent Charlotte city and North Carolina state businessman said he thought it would be good for me to attend either the Republican or the Democratic national conventions. It would help me in the course.

Which convention one would I prefer, he asked?

Frankly, I told him it didn’t matter. He said he knew state leaders in both parties, but a member of the N.C. Republican Committee “owes me a favor,” he said. So, soon, I found myself going to California after I was named a sergeant-at-arms for the convention.

Later that summer I would turn 20 years old and was assigned to assist Rockefeller.

My job during the convention’s four days was to be with Rockefeller and his family in their special box, just off the convention floor. When I met him, the governor was gracious and laughed when he realized I was a “Southerner” assigned to a “Yankee.” But we got along great!

My duty was to help him any way I could, and I manned his box when he was on the convention floor with the New York delegation.

It was a raucous four-day gathering, the ugliest convention in decades, according to news reports. There were also numerous and historic events.

The name of Maine Sen. Margaret Chase Smith was placed in nomination. It was the first time a woman had been nominated at a major party convention. She got a glorious reception, as I recall.

The friction between Goldwater and Rockefeller followers broke out many times. I was asked to accompany Rockefeller to events elsewhere in the convention hall. My job then as a sergeant-at-arms was to help clear a path for him amid Goldwater followers.

When Rockefeller addressed the convention, I was in the box with the family and remember him being booed. On the first ballot, Goldwater had 883 votes (655 were needed for the nomination) while Scranton was next and Rockefeller a poor third.

By the end of the convention, Rockefeller had introduced me to most of the party’s leadership, especially those who visited his convention box. I most especially remember meeting Sen. Everett Dirksen of Illinois (Senate minority leader) and his full-head of wavy gray hair.

I had a marvelous time at the convention, meeting and greeting political higher-ups. When I returned home to Charlotte, I had many stories to tell (most of which I have forgotten in the ensuing 60 years) and the convention DID help me in the fall government course.

I also enjoyed my brief relationship with Rockefeller; my association with him resumed a decade later when he began visiting Colonial Williamsburg, which his father had financially supported. I was then a newspaper bureau chief working in the city. I met him on the street and introduced himself. He did remember me, “that Southern boy,” he said.

Rockefeller frequently called me when he was back in town, asking about my family and my newspaper work. He died in 1979, after serving for several years as vice president under President Gerald Ford.

By the way, in the November 1964 presidential election, the Republican Goldwater-Rep. William E. Miller ticket lost to President Lyndon Johnson and Sen. Hubert Humphrey.

Wilford Kale is a correspondent for The Virginia Gazette.

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