Is that renovation actually worth the money?
If you own commercial real estate, you probably ask yourself that question a lot.
You know that a high-quality fit-out can attract better tenants. And you know it allows you to charge higher rent.
But here is the deal:
Revenue is vanity. Profit is sanity. Yield is reality.
Most investors make the mistake of looking only at the construction cost versus the rent increase. But they miss the bigger picture: Asset Valuation.
A smart fit-out doesn’t just improve your monthly cash flow. Because of how Cap Rates work, a small increase in rent can lead to a massive jump in your property’s total value.
I built this Fit-Out Yield Calculator to help you run the numbers instantly. It tells you exactly how much value you are creating, your break-even point, and your true ROI.
Let’s dive in.
Fit-Out Yield
Calculate ROI & Value Creation
Property Details
Investment
Rent Scenarios
Total Asset Value Increase
Calculated capitalization of added net operating income at an 8.0% cap rate.
MONTHLY (AFTER AMORTIZATION)
TOTAL CASHFLOW INCREASE
Investment ROI
This tool is for general informational and educational purposes only and is based on assumptions that may not match your specific situation. Results are estimates only, are not guaranteed to be accurate, complete, or up to date, and do not constitute financial, legal, tax, or investment advice. You must verify all numbers, terms, and conclusions with qualified professionals (such as a lawyer, accountant, mortgage broker, or licensed real estate professional) before making any decision. By using this tool, you agree that Semerenko Group and its owners, employees, and partners are not responsible or liable for any loss, damage, or decision you make based on its results, to the fullest extent permitted by law.
How to Analyze Your Results
You just ran the numbers. Now, let’s break down what they actually mean for your portfolio.
There are three key metrics you need to pay attention to.
1. The “Cap Rate” Multiplier This is the most important number on the screen.
In the Value Creation section, you will see a large number (Total Asset Value Increase). This is often much higher than people expect.
Why?
Because commercial real estate is valued based on the income it generates.
When you increase the rent by 10 NIS, you don’t just get 10 NIS. You get that 10 NIS divided by your Cap Rate.
The Rule of Thumb: In an 8% Cap Rate environment, every 1 NIS of annual rent increase adds 12.5 NIS to the property’s value. This is how fit-outs generate massive equity wealth, even if the monthly cash flow seems small.
2. Amortized Cost vs. Rent Uplift This is your “sanity check.”
Rent Uplift: This is the extra money the tenant pays you because of the renovation.
Amortized Cost: This is the cost of the renovation spread out over the lease term.
For the deal to make sense, your Rent Uplift must be significantly higher than your Amortized Cost. If the numbers are close, you are essentially financing the tenant’s renovation for free.
3. The Break-Even Point This tells you how long it takes to earn back your cash investment.
In commercial real estate, a break-even point under 24 months is generally considered a “Home Run.” If your break-even point is longer than half of the lease term, the risk increases significantly.
The Bottom Line? Don’t just build for the sake of building. Use this data to ensure every shekel you spend on construction comes back to you as equity in the building.
