Forgewell Certification Platform

18 min

NOI, cap rate, cash-on-cash, IRR, and equity multiple

Lesson

Translate property operations into the metrics analysts use to price risk and return.

Core concepts

- Net operating income before debt service
- Going-in versus exit cap rate
- Levered versus unlevered returns

Example

A $750,000 NOI asset acquired for $10,000,000 has a 7.50% going-in cap rate before financing effects.

Formula block

Cap Rate = NOI / Purchase PriceCash-on-Cash = Annual Cash Flow / Initial EquityEquity Multiple = Total Distributions / Total Equity Invested

Mistakes to avoid

- Mixing debt service into NOI
- Comparing levered IRR to unlevered cap rates
- Ignoring timing when interpreting equity multiple

14 min

Property types and risk profiles

Lesson

Understand how multifamily, office, retail, industrial, hotel, and mixed-use assets differ in underwriting.

Core concepts

- Lease duration and rollover risk
- Expense responsibility
- Tenant concentration
- Operational intensity

Example

A single-tenant office asset can show stable current income but carry concentrated renewal risk at lease expiration.

Mistakes to avoid

- Using one vacancy assumption across every property type
- Ignoring tenant rollover timing
- Treating hotel revenue like base rent

42 min

Capital stack and return attribution workshop

Lesson

Break down how senior debt, preferred equity, common equity, fees, and reserves affect risk, control, and investor returns.

Core concepts

- Priority of payment
- Common equity residual risk
- Preferred equity versus mezzanine debt
- Return attribution by source

Example

A deal can show a strong project IRR while common equity bears most of the downside because senior claims are paid first.

Formula block

Loan Basis = Loan Amount / Total Project CostResidual Equity Value = Asset Value - Debt Payoff - Senior Claims

Practice assignment

Given a $30M acquisition funded with 60% senior debt, 10% preferred equity, and 30% common equity, calculate each capital source and rank payment priority.

Expected deliverable

Capital stack summary table with risk notes for each tranche.

Mistakes to avoid

- Calling every equity layer the same risk
- Ignoring reserves in equity required
- Using levered returns to defend property-level pricing

45 min

Mini underwriting drill: from rent to recommendation

Lesson

Use a small property case to connect rent, expenses, NOI, value, debt constraints, and investment recommendation.

Core concepts

- NOI bridge
- Value bridge
- Debt constraint
- Recommendation language

Example

If lender proceeds fall below the sponsor plan, the equity check grows and projected equity returns can compress even when NOI is unchanged.

Formula block

Value = NOI / Cap RateCash Flow After Debt = NOI - Debt Service - Capital Reserves

Practice assignment

Prepare a base, upside, and downside valuation for a $950K NOI neighborhood retail asset.

Expected deliverable

One-page analyst note with cap-rate table and recommendation.

Mistakes to avoid

- Letting a single metric make the decision
- Ignoring financing feasibility
- Writing recommendations without downside conditions

Real Estate Finance Foundations

NOI, cap rate, cash-on-cash, IRR, and equity multiple

Core concepts

Example

Property types and risk profiles

Core concepts

Example

Capital stack and return attribution workshop

Core concepts

Example

Mini underwriting drill: from rent to recommendation

Core concepts

Example

Real Estate Finance Foundations quiz