Going-in cap rate, cash-on-cash return, and IRR on a commercial lease deal — priced the way commercial investors actually underwrite it.
The Property
The Lease
Operating Expenses
Exit
Cumulative net cash flow (incl. exit proceeds)
Year 1 expense breakdown
Going-in cap rate is year-1 NOI ÷ purchase price. Exit value is calculated by dividing the final year's NOI by the exit cap rate — the standard commercial valuation method — rather than assuming a flat appreciation rate. IRR is solved from the full annual cash-flow timeline (initial investment, yearly net cash flow, and net sale proceeds in the final year) using an internal rate of return solver. Equity multiple is total cash received (all cash flows plus exit proceeds) divided by total cash invested. This is an illustrative estimate, not financial or tax advice — actual commercial deals involve lease structuring, CAM reconciliation, and tenant risk this tool doesn't model.
Residential ROI is usually judged on price appreciation and rental yield. Commercial property is underwritten differently — investors look at Net Operating Income (NOI), the going-in cap rate, cash-on -cash return on the equity actually invested, and the IRR across the full holding period, including how the asset is valued at exit. This calculator follows that same framework rather than a simplified appreciation-only model.
In Indore, commercial ROI varies significantly between high-street retail, IT/office space near the Super Corridor, and warehousing on the outskirts — each with different lease structures, escalation patterns, vacancy risk, and cap rates. Getting the assumptions right for your specific asset class matters more here than in residential underwriting.
The calculator builds a full annual cash-flow timeline — income, expenses, debt service, and exit proceeds — then solves for IRR the same way a commercial underwriting model would.
NOI = Effective Gross Income − Operating ExpensesGoing-in Cap Rate = NOI (Year 1) ÷ Purchase PriceCash-on-Cash Return = Net Cash Flow (Year 1) ÷ Total Cash InvestedExit Value = NOI (Final Year) ÷ Exit Cap RateIRR solved from: −Cash Invested, Net Cash Flow(Y1…Yn−1), Net Cash Flow(Yn) + Net Sale ProceedsEquity Multiple = Total Cash Received ÷ Total Cash Invested
Rent escalates annually per your lease terms; operating expenses inflate independently. If financed, annual debt service is deducted from NOI to get net cash flow, and the remaining loan balance at exit is subtracted from the sale price to arrive at net proceeds.
A longer lease with a credible tenant reduces vacancy risk and re-leasing costs — both of which directly hit NOI when they occur.
Your exit return is highly sensitive to the exit cap rate assumption — a rate that expands (rises) versus your going-in rate can significantly reduce IRR even with strong NOI growth.
Financing amplifies cash-on-cash return when the cap rate exceeds your loan interest rate (positive leverage), but also amplifies downside if rents fall or vacancy rises.
Footfall corridors, IT/office clusters, and last-mile logistics hubs in Indore command different rent-per-sq-ft and vacancy profiles — location drives the lease assumptions above.
Property tax, CAM shortfalls, and insurance typically rise faster than headline inflation in ageing commercial assets — underestimating this overstates long-term NOI.
Longer holds let rent escalations compound and dilute purchase/closing costs, but also carry more cap-rate-cycle risk at exit.
Cap rates vary by asset class and micro-market, but commercial retail and office assets in Indore have typically traded in a broad 7–10% going-in cap rate range, with prime, well-leased assets commanding lower cap rates (higher valuations) than secondary locations.
Commercial property is valued on income, not comparable sales, so institutional and experienced investors value the exit by dividing the final year's NOI by an assumed exit cap rate rather than compounding a flat appreciation percentage.
Cap rate measures the property's unlevered return (NOI ÷ price), ignoring financing. Cash-on-cash measures your actual return on the equity you invested, after debt service — so it reflects the effect of leverage.
Yes. The IRR calculation includes net sale proceeds (exit value minus selling costs and any remaining loan balance) added to the final year's cash flow before solving for the annualized return.
Financing can boost cash-on-cash return when the property's cap rate exceeds your loan interest rate, but it increases risk if rents fall or vacancy rises. Toggle the loan option in the calculator to compare both scenarios.
No. This tool provides an illustrative estimate based on the assumptions you enter and does not model lease structuring, CAM reconciliation, or tenant-specific risk. Speak with a floor.estate advisor for guidance specific to your deal.
Our investment advisory team can validate your rent, cap rate, and vacancy assumptions against live commercial listings and lease comparables.