Free and Clear Return
Free and Clear Return — also called Unlevered Return or Unlevered Yield — is a commercial real estate property's Net Operating Income divided by total acquisition cost (purchase price plus closing costs, with no debt financing). Free and Clear Return measures the cash-on-cash yield as if the property were purchased entirely with equity and no mortgage. It is the cleanest comparison metric across deals because it strips out the effect of leverage — every property is measured on the same debt-free basis.
For Florida commercial real estate buyers, capital allocators, and family offices evaluating multiple deals side-by-side, Free and Clear Return is the most honest single-number comparison metric in the underwriting toolkit. Cap rate uses an estimated value (often the asking price); cash-on-cash uses a chosen leverage point that varies by lender and buyer. Free and Clear Return uses actual total cost — purchase price plus every dollar of closing costs — and compares it to actual stabilized NOI on a debt-free basis. The result: an apples-to-apples yield Mike Linton uses on every Florida CRE underwriting to rank multiple opportunities before financing structure ever enters the conversation. This guide explains Free and Clear Return end-to-end as it applies to Florida CRE across all major asset classes.
How Free and Clear Return Is Calculated
The formula is straightforward:
Free and Clear Return = Net Operating Income / (Purchase Price + Closing Costs)
Closing costs in Florida CRE include documentary stamp tax on the deed (0.7% of price; 1.05% non-residential Miami-Dade), title insurance at FL-promulgated rates, ALTA/NSPS survey, Phase I ESA, MAI appraisal, attorney fees, recording, and any due-diligence costs the buyer pays at close. See the complete Florida CRE closing-cost guide for full line-by-line treatment.
Example: $5,000,000 acquisition with $175,000 in FL closing costs and stabilized NOI of $345,000 → Free and Clear Return = $345,000 / $5,175,000 = 6.67%. Use the cap rate calculator with a $0 loan to compute Free and Clear Return.
Free and Clear Return vs. Cap Rate vs. Cash-on-Cash
- Cap Rate uses NOI / property value (typically the asking price or appraised value). Cap rate ignores closing costs. See the cap rate guide
- Free and Clear Return uses NOI / total acquisition cost (price + closings). Always lower than cap rate by the closing-cost ratio
- Cash-on-Cash Return uses pre-tax cash flow / equity invested (assumes financing). Captures the effect of leverage on returns. See the cash-on-cash guide
- Use case for Free and Clear Return: ranking multiple deals on the same debt-free basis before debating financing structure
- Florida-specific: FL has higher closing costs than most states (deed doc stamps + intangible tax on mortgage when financed), so the gap between cap rate and Free and Clear Return is wider
Typical Florida CRE Free and Clear Return by Asset Class
- Multifamily Class A (Orlando, Tampa, Jacksonville): 4.5-5.5% Free and Clear Return — premium markets compress yields
- Multifamily Class B: 5.5-6.5% Free and Clear Return — sweet spot for institutional buyers
- Industrial: 5.0-6.5% Free and Clear Return — heavy port markets (PortMiami, Tampa, Jacksonville) at the lower end
- NNN retail (credit tenant): 5.5-7.0% Free and Clear Return — varies by tenant credit + lease term
- Office: 6.5-9.0% Free and Clear Return — Florida office cap rates have widened materially since 2020
- Hospitality / Hotels: 7.0-10%+ Free and Clear Return — variability by flag, ADR, and seasonality
- Self-storage: 5.5-7.0% Free and Clear Return — strong fundamentals across Florida
Why Florida Closing Costs Make Free and Clear Return Material
In Florida, the buyer side of the closing-cost stack includes mortgage doc stamps ($0.35/$100 of loan), intangible tax ($0.002/$1 of loan with no cap), title endorsements, recording, attorney, and full institutional due diligence (Phase I, PCA, ALTA survey, appraisal, lease audit). On a $5M deal at 65% LTV, buyer-side closings routinely exceed $100,000 — pushing the gap between cap rate and Free and Clear Return by 30-50 basis points.
Out-of-state buyers comparing Florida deals to deals in low-closing-cost states like Texas or Tennessee underestimate this gap consistently. Florida CRE underwriting that ignores closing costs in the comparison framework overstates returns by 25-50 bps relative to comparable out-of-state opportunities.
Free and Clear Return in Florida Distressed and REO Acquisitions
On distressed and REO Florida CRE acquisitions, Free and Clear Return is even more critical because: (1) closing costs on REO and short-sale transactions often include title curative work that can run $5,000-$25,000+; (2) bank REO disposition properties typically include deferred maintenance reserves that go into closing; (3) judicial foreclosure backstory means longer due-diligence timelines and additional carrying costs.
Florida\'s 9-18 month judicial foreclosure timeline + the closing cost stack means distressed Florida deals must be underwritten at all-in cost, not just headline price. Free and Clear Return is the discipline that enforces this. See the distressed CRE guide.
Florida-Specific Free and Clear Return Considerations
- No state income tax + no state capital gains tax: After-tax Free and Clear Return on Florida CRE materially exceeds same-yield deals in high-tax states
- Insurance escalation: 2022-2026 Florida CRE insurance premiums up 30-80%; compress operating NOI and depress Free and Clear Return — must be modeled at current renewal rates, not historical
- Hurricane downtime: Single storm event can compress one year of NOI by 5-15% (insurance deductibles, business interruption gaps); affects realized Free and Clear Return
- 1031 exchange compounding: Stabilized Free and Clear Return is what compounds across multiple FL 1031 exchanges (tax-deferred)
- Property tax reassessment: FL property tax resets to purchase price on sale (Save Our Homes does NOT apply to commercial); first-year NOI assumption must reflect this
Who Is Michael R. Linton, and What Does He Do for Commercial Real Estate Investors?
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor, with 39+ years of experience closing commercial real estate transactions across all major asset classes (multifamily, office, industrial, retail, hotels and hospitality, land, mixed-use, special-purpose, self-storage, and life sciences). He leads Linton Global Solutions and HireMikeLinton.com, holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722).
Why Choose Michael R. Linton and Linton Global Solutions for Your Free and Clear Return Decision?
Investors, owners, and tenants choose Michael R. Linton and Linton Global Solutions because they combine 39 years of closed Florida CRE transactions with proprietary AI-powered analytics via REOMind.ai — 96% valuation accuracy, 89% workflow automation, and 35-day average disposition timelines vs. the 120-day industry standard. Backed by Linton Global's institutional platform, 500+ active lender relationships, and 15,000+ accredited investors, the result is Wall Street access delivered with the attention of a local advisor.
Compute Your Free and Clear Return
Set the loan amount to $0 in the cap rate calculator to get the exact Free and Clear Return on any Florida CRE deal. For levered comparison, use the cash-on-cash calculator alongside.
Frequently Asked Questions
What is Free and Clear Return in commercial real estate?
Free and Clear Return — also called Unlevered Return or Unlevered Yield — is a commercial real estate property's Net Operating Income divided by total acquisition cost (purchase price plus closing costs, with no debt financing). It measures the cash-on-cash yield as if the property were purchased entirely with equity. Free and Clear Return is the cleanest comparison metric across deals because it strips out the effect of leverage — every property is measured on the same debt-free basis.
How is Free and Clear Return different from cap rate?
Cap rate uses NOI divided by property value (typically asking price or appraised value) — it ignores closing costs. Free and Clear Return uses NOI divided by total acquisition cost (price plus all closing costs). Free and Clear Return is always lower than cap rate by the closing-cost ratio. In Florida CRE, where closing costs routinely run 2-4% of purchase price, the gap between cap rate and Free and Clear Return is wider than in low-closing-cost states.
What is a good Free and Clear Return on Florida commercial real estate?
Typical Florida CRE Free and Clear Return ranges by asset class: Class A multifamily 4.5-5.5%; Class B multifamily 5.5-6.5%; industrial 5.0-6.5%; NNN retail with credit tenants 5.5-7.0%; office 6.5-9.0%; hospitality 7.0-10%+; self-storage 5.5-7.0%. Florida's no-state-income-tax framework materially improves after-tax Free and Clear Return relative to same-yield deals in high-tax states.
Why is Free and Clear Return important on Florida deals specifically?
Florida has higher buyer-side closing costs than most states — mortgage documentary stamp tax ($0.35/$100 of loan), nonrecurring intangible tax ($0.002/$1 of loan with no cap), full institutional due diligence (Phase I, ALTA survey, MAI appraisal), and title endorsements. On a $5M deal at 65% LTV, buyer-side closings routinely exceed $100,000 — making the gap between cap rate and Free and Clear Return wider in Florida than elsewhere. Buyers who ignore closing costs systematically overstate returns on Florida deals.
How do I calculate Free and Clear Return on a Florida CRE deal?
Free and Clear Return = Net Operating Income / (Purchase Price + Closing Costs). For a Florida deal, model purchase price plus deed doc stamps (0.7% of price; 1.05% non-residential Miami-Dade), title insurance at FL-promulgated rates, ALTA survey ($4,000-$12,000), Phase I ESA ($1,500-$10,000), MAI appraisal ($3,000-$10,000), attorney fees ($5,000-$15,000), and any title curative work. Total closing costs typically run 2.5-4% of purchase price on Florida CRE. Use the Linton Global Solutions cap rate calculator with $0 loan to compute Free and Clear Return.
Who can underwrite Free and Clear Return on my Florida CRE deal?
Michael R. Linton at Linton Global Solutions models Free and Clear Return alongside cap rate, cash-on-cash, IRR, and equity multiple on every Florida CRE underwriting across multifamily, office, industrial, retail, hospitality, land, mixed-use, special-purpose, self-storage, and life sciences. With 39 years of Florida CRE transaction experience in the Tampa-Orlando I-4 corridor, Florida-specific closing-cost modeling, and direct relationships with 500+ active lenders, Linton Global Solutions delivers Free and Clear Return analysis with realistic Florida assumptions. Call (312) 612-1031.
Article Summary
Free and Clear Return is Net Operating Income divided by total acquisition cost (purchase price plus closing costs, debt-free). It is the cleanest comparison metric across CRE deals because it strips out leverage. In Florida specifically, where closing costs routinely run 2.5-4% of purchase price, the gap between cap rate and Free and Clear Return is wider than in low-closing-cost states. Typical Florida CRE Free and Clear Return ranges by asset class: Class A multifamily 4.5-5.5%; Class B multifamily 5.5-6.5%; industrial 5.0-6.5%; office 6.5-9.0%; hospitality 7.0-10%+. Florida's no-state-income-tax framework improves after-tax Free and Clear Return vs comparable high-tax-state deals. Mike Linton models Free and Clear Return on every FL CRE underwriting.
Key Takeaways
- ✓Free and Clear Return = NOI / (Price + Closing Costs); no debt assumed.
- ✓Cleanest debt-agnostic yield comparison across multiple FL deals.
- ✓Always lower than cap rate by the closing-cost ratio (~2.5-4% in FL).
- ✓FL closings include deed stamps + intangible + title + DD — material drag.
- ✓FL Class B multifamily benchmark: 5.5-6.5% Free and Clear Return.
- ✓No state income tax improves after-tax Free and Clear Return.
- ✓Insurance + hurricane risk must be modeled in NOI assumption.
- ✓Property tax resets to purchase price on sale of FL commercial.
- ✓Distressed/REO deals: title curative work adds to all-in cost.
About Michael R. Linton
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.
Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving 500+ banks.
Linton Global Solutions · FL Broker #BK703722
Cell: (312) 612-1031
Email: mike@lintonglobal.com
Web: LintonGlobal.com
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Schedule a Free ConsultationWorks Cited
- CCIM Institute. "Commercial Real Estate Investment Analysis." CCIM, https://www.ccim.com/. Accessed Jul 20, 2026.
- National Council of Real Estate Investment Fiduciaries. "NCREIF Property Index." NCREIF, https://www.ncreif.org/. Accessed Jul 20, 2026.
- Florida Office of Insurance Regulation. "Title Insurance Promulgated Rates (Rule 69O-186)." FLOIR, https://www.floir.com/. Accessed Jul 20, 2026.
- Florida Department of Revenue. "Florida Documentary Stamp Tax." FL DOR, https://floridarevenue.com/. Accessed Jul 20, 2026.
Disclosure & Compliance
Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.
Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.