Calculating Cash on Cash Return

[Mark Rauch]

When calculating the cash on cash return of a commercial property do you include the debt service in the operating expenses? Asking for the property is $18 million. I'm the agent. Just want to do a quick analysis before I get the actual expenses. All leases are NNN so most expenses are passed to the tenants. Gross annual income is $900K. I plugged in a 5% Vacancy. $100K for miscellaneous expenses. Using 4.75% for the loan with 30% down and I'm getting a 0.92% cash on cash return. Does that seem right? That's an awful cash on cash return. Similar properties in my area are selling for a 4.5 to 5.0 cap rate. So by that gauge $18m falls in line. Would the c on c be that low with a 4.5% cap rate? Could one assume the ROI would not look good either? I'm not an investment broker (yet) so I'm a bit confused. Am I missing something? Thanks.