Investment Analysis Tools
to Guide Investment Decisions
Steven R. Price, CCIM
Price Properties, Inc.
Colorado Springs, Col...
Disclaimer
• The screenshots contained herein include
– CCIM Excel® templates
• 5-Year Analysis Workbook
• DCF Analysis Wo...
Objectives
• Evaluate various investment analysis tools
• Use digital tools to enhance your presentation,
not dominate it
...
What’s in your tool belt?
Taxation

Negotiating

Forecasting
Financial
Analysis

Presenting

GRM

Supply &
Demand

NPV
Cap...
Steve’s 1st Rule
Computer don’t sell real estate.
People do.
People don’t trust computers.
Trust is the key to selling any...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
Qualifying
Needs
Urgency
Motivation
Expectations
Resources
Authority
Loyalty

________________________
___________________...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
If you don’t give trust to
others, it’s because they
haven’t earned it.
If you don’t get trust from
others, it’s because Y...
All things being
equal, people want to do
business with their friends.
All things being not quite so
equal, people still w...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
Center for Creative Learning
SAVI Learning Styles
•
•
•
•

Somatic
Auditory
Visual
Intellectual

Learning by Doing
Learning by Listening
Learning by Ob...
Steve’s SAVI Scores
• Meier conducted an 80 question
survey where attendees answered
questions about how they perceive
the...
Steve’s SAVI Scale
Auditory/Affective
(Feeling)
37%

16%

Somatic

Visual

(Doing)

(Observing)
24%

23%
Intellectual
(Ana...
24

28

32

AUDITORY

Type 1

4

8 12

16

20

Type 4

16

12

8

4

4

8 12

16

20

24

16

12

8

4

20

Type 3

20

32...
Use Visual Aids
There are twenty-two times the
number of nerves from the eye to the
brain as from the ear to the brain.

T...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
MOTOR &
SENSORY CORTEX

TRIUNE
BRAIN

NEOCORTEX
•Think

•Body Movement

•Reason

•Talking

•Plan
•Solve
•Learn

LIMBIC
SYS...
Buyer Types
1. Apathetic Buyer (about 5%)
– Will never buy anything, no matter how good

2. Self-Actualizing Buyer (about ...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
Time Management
The average attention span of an adult
is about three sentences.

The Psychology of Selling, Brian Tracy
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
CI-104 Case Study
Hidden Lakes Retail
Year 1

Year 2

Year 3

Year 4

Year 5

NATIONAL CREDIT TENANTS
Potential Rental Income
+ Potential Pa...
Property Name

Annual Property Operating Data

HIDDEN LAKES RETAIL

Location
Type of Property
Size of Property

COMMERCIAL...
Cash Flow Analysis Worksheet
Property Name
Prepared For
Prepared By
Date Prepared

HIDDEN LAKES RETAIL
CI-104, CASE 3

23-...
Alternative Cash Sales Worksheet
Mortgage Balances
End of Year:
Principal Balance - 1st Mortgage
Principal Balance - 2nd M...
Cash Flow Analysis Worksheet
Property Name
Prepared For
Prepared By
Date Prepared

HIDDEN LAKES RETAIL
CI-104, CASE 3

23-...
Taxable Income
End of Year :

1

2

3

4

5

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

Potential Rental Income
-Vacancy & Cr...
Alternative Cash Sales Worksheet
Mortgage Balances
End of Year:
Principal Balance - 1st Mortgage
Principal Balance - 2nd M...
CALCULATION OF ADJUSTED BASIS:
1
Basis at Acquisition
2
+Capital Additions
3
-Cost Recovery (Depreciation) Taken
4
-Basis ...
OF

$
(6,166,000)
393,473
404,674
416,256
428,234
440,621 + 7,379,541
9.95%

NPV= $0
@ 9.95%

Alternative 2

n
0
1
2
3
4
5...
How much should I pay?
n
0
1
2
3
4
5
IRR=

$
(6,166,000)
292,736
297,662
296,455
294,826
286,981 + 7,007,641
7.13%

NPV= (...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
CCIM Institute

Note: Do not enter any inf ormation on this sheet.
All values are derived f rom the Input Sheet.

Equippin...
CCIM Institute

Note: Do not enter any inf ormation on this sheet.
All values are derived f rom the Input Sheet.

Equippin...
Investment Benchmarks
Legend

CCIM Institute
Input Cells

Equipping the world’s best minds in commercial real estate

Meas...
Discount Rate Sensitivity
EOY 10 Sales Price

Purchase

$4,418,000

Lease
$0

0%

2%

4%

6%

8%

10%

12%

14%

After Tax...
Sales Price Sensitivity
Discount Rate

9.00%

$0

After Tax Net Present Value

($1,000,000)

($2,000,000)

($3,000,000)

$...
Are they really
interested or just
shopping?

How do I get
them to like me
and trust me?

How do I get
them to make a
deci...
REIWISE @ STDB.com
planEASE @ www.planease.com
The CCIM Millionaire Next Door
An astounding 85 percent of self-made
millionaires in America admitted that they
were no mo...
What can I do?
•
•
•
•
•
•
•
•
•

Qualify and don’t waste anyone’s time
Let them know they’re important
Give your trust & ...
Thank you for attending!
Steven R. Price, CCIM
Price Properties, Inc.
Colorado Springs, Colorado
steve@stevepriceccim.com
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
How to Motivate Clients to Make Decisions
Upcoming SlideShare
Loading in …5
×

How to Motivate Clients to Make Decisions

686 views
478 views

Published on

Learn how to design investment analysis presentations that are easy to understand and will motivate clients to make investment decisions. Participate in hands-on demonstrations of how to use CCIM technology tools for different investment analysis output levels.

Published in: Real Estate, Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
686
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
25
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Neil Fleming's VAK/VARK modelOne of the most common and widely-used categorizations of the various types of learning styles is Fleming's VARK model (sometimes VAK) which expanded upon earlier Neuro-linguistic programming (VARK) models: Visual learnersAuditory learnersReading-writing preference learnersKinesthetic or tactile learnersFleming claimed that visual learners have a preference for seeing (think in pictures; visual aids such as overhead slides, diagrams, handouts, etc.). Auditory learners best learn through listening (lectures, discussions, tapes, etc.). Tactile/kinesthetic learners prefer to learn via experience—moving, touching, and doing (active exploration of the world; science projects; experiments, etc.). Its use in pedagogy allows teachers to prepare classes that address each of these areas. Students can also use the model to identify their preferred learning style and maximize their educational experience by focusing on what benefits them the most.
  • JeffreyGitomer is the author of many nuggets of wisdom, including The Sales Bible, The Little Red Book of Selling, The Little Black Book of Connections, The Little Gold Book of YES Attitude, The Little Green Book of Getting Your Way and others.“Superior knowledge and genuine help lead to trust.”“Competency and superior skill lead to trust.”
  • Dave Meier founded The Center for Accelerated Learning in 1980. Since then, he has prepared more corporate training professionals in accelerated learning that any other person worldwide.In 2004, Dave Meier was the keynote speaker at our CCIM Instructor Conference. The principals and tips delivered by Dave regarding how learners learn best are easily adapted to benefit any CCIM looking to enhance his or her presentation skills and close more sales.Approach: Get learners totally and actively involved from start to finish as creators of their own knowledge and skill.
  • How to Motivate Clients to Make Decisions

    1. 1. Investment Analysis Tools to Guide Investment Decisions Steven R. Price, CCIM Price Properties, Inc. Colorado Springs, Colorado 10:30 – 11:45
    2. 2. Disclaimer • The screenshots contained herein include – CCIM Excel® templates • 5-Year Analysis Workbook • DCF Analysis Workbook v9.5 • Lease vs. Purchase Workbook – STDB hosted software available to CCIM members – Commercially available packaged software Neither the CCIM Institute or the Presenter are selling or endorsing the commercially available software shown. It is being presented solely for illustration purposes to reflect differences between CCIM-owned and CCIM-endorsed products.
    3. 3. Objectives • Evaluate various investment analysis tools • Use digital tools to enhance your presentation, not dominate it • Blend all skills and tools to: – Improve Listing Decisions – Improve Investment Decisions – Improve Presentations – Close more transactions
    4. 4. What’s in your tool belt? Taxation Negotiating Forecasting Financial Analysis Presenting GRM Supply & Demand NPV Capital Accumulation IRR Financing User Decisions Investor Benchmarks Calculator GIS GRM Site Analysis Partnerships Computer Investor Decisions Tablet Software Cash-on-Cash
    5. 5. Steve’s 1st Rule Computer don’t sell real estate. People do. People don’t trust computers. Trust is the key to selling anything.
    6. 6. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    7. 7. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    8. 8. Qualifying Needs Urgency Motivation Expectations Resources Authority Loyalty ________________________ ________________________ ________________________ ________________________ ________________________ ________________________ ________________________
    9. 9. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    10. 10. If you don’t give trust to others, it’s because they haven’t earned it. If you don’t get trust from others, it’s because YOU haven’t earned it. Gitomer Little Teal Book of Trust, Jeffrey Gitomer
    11. 11. All things being equal, people want to do business with their friends. All things being not quite so equal, people still want to do business with their friends. Gitomer Little Teal Book of Trust, Jeffrey Gitomer
    12. 12. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    13. 13. Center for Creative Learning
    14. 14. SAVI Learning Styles • • • • Somatic Auditory Visual Intellectual Learning by Doing Learning by Listening Learning by Observing Learning by Analyzing The Accelerated Learning Handbook, Dave Meier
    15. 15. Steve’s SAVI Scores • Meier conducted an 80 question survey where attendees answered questions about how they perceive they learn best, what captures the interest and attention, etc. S A V I 24 18 13 25 The Accelerated Learning Handbook, Dave Meier-
    16. 16. Steve’s SAVI Scale Auditory/Affective (Feeling) 37% 16% Somatic Visual (Doing) (Observing) 24% 23% Intellectual (Analyzing) The Accelerated Learning Handbook, Dave Meier
    17. 17. 24 28 32 AUDITORY Type 1 4 8 12 16 20 Type 4 16 12 8 4 4 8 12 16 20 24 16 12 8 4 20 Type 3 20 32 28 24 32 28 24 SOMATIC INTELLECTUAL Type 2 28 32 VISUAL
    18. 18. Use Visual Aids There are twenty-two times the number of nerves from the eye to the brain as from the ear to the brain. The Psychology of Selling, Brian Tracy
    19. 19. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    20. 20. MOTOR & SENSORY CORTEX TRIUNE BRAIN NEOCORTEX •Think •Body Movement •Reason •Talking •Plan •Solve •Learn LIMBIC SYSTEM •Excitement •Emotion •Long Term Memory •Instincts •Feeding •Fighting •Fleeing •Create •Verbal REPTILIAN BRAIN •Survival •Balance •Autonomic Systems
    21. 21. Buyer Types 1. Apathetic Buyer (about 5%) – Will never buy anything, no matter how good 2. Self-Actualizing Buyer (about 5%) – Knows exactly what s/he wants and $$$ 3. Analytical Buyer (about25%) – Self-contained and task oriented; slow and specific 4. Relationship Buyer (about25%) – Concerned about people and their opinions 5. Driver Buyer (about 25% depending on what you sell) – Direct, impatient, straight to the point; deal maker 6. Socializer Buyer (about25%) – Outgoing, extroverted, achievement & results oriented The Psychology of Selling, Brian Tracy
    22. 22. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    23. 23. Time Management The average attention span of an adult is about three sentences. The Psychology of Selling, Brian Tracy
    24. 24. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    25. 25. CI-104 Case Study
    26. 26. Hidden Lakes Retail Year 1 Year 2 Year 3 Year 4 Year 5 NATIONAL CREDIT TENANTS Potential Rental Income + Potential Pass-thrus = Total Potential Income - Vacancy & Credit Losses @0% = Gross Operating Income - Taxes - Insurance - CAM = Net Operating Income $1,345,000 $553,000 $1,898,000 $0 $1,898,000 $158,000 $118,500 $276,500 $1,345,000 $1,345,000 $566,825 $1,911,825 $0 $1,911,825 $161,160 $120,870 $284,795 $1,345,000 $1,345,000 $581,009 $1,926,009 $0 $1,926,009 $164,383 $123,287 $293,339 $1,345,000 $1,345,000 $595,563 $1,940,563 $0 $1,940,563 $167,671 $125,753 $302,139 $1,345,000 $1,345,000 $610,496 $1,955,496 $0 $1,955,496 $171,024 $128,268 $311,203 $1,345,000 $1,345,000 $625,818 $1,970,818 $0 $1,970,818 $174,445 $130,834 $320,539 $1,345,000 LOCAL CREDIT TENANTS Potential Rental Income + Potential Pass-thrus = Total Potential Income - Vacancy & Credit Losses @7% = Gross Operating Income - Taxes - Insurance - CAM = Net Operating Income $372,000 $168,000 $540,000 $37,800 $502,200 $48,000 $36,000 $84,000 $334,200 $384,360 $172,200 $556,560 $38,959 $517,601 $48,960 $36,720 $86,520 $345,401 $397,139 $176,509 $573,648 $40,155 $533,493 $49,939 $37,454 $89,116 $356,983 $410,351 $180,931 $591,281 $41,390 $549,892 $50,938 $38,203 $91,789 $368,961 $424,011 $185,467 $609,478 $42,663 $566,815 $51,957 $38,968 $94,543 $381,348 $438,135 $190,122 $628,257 $43,978 $584,279 $52,996 $39,747 $97,379 $394,157 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157 TOTAL NET OPERATING INCOME Year 6
    27. 27. Property Name Annual Property Operating Data HIDDEN LAKES RETAIL Location Type of Property Size of Property COMMERCIAL 103,000 (Sq. Ft./Units) CI-104, CASE 3 Purpose of analysis Assessed/Appraised Values Land 20 Improvements 80 Personal Property 0 Total 100 Adjusted Basis as of: 23-Oct-13 ALL FIGURES ARE ANNUAL 1 2 3 4 5 7 8 9 10 11 12 13 14 POTENTIAL RENTAL INCOME Less: Vacancy & Cr. Losses EFFECTIVE RENTAL INCOME Plus: Other Income (collectable) GROSS OPERATING INCOME OPERATING EXPENSES: Real Estate Taxes Personal Property Taxes Property Insurance Off Site Management Payroll Expenses/Benefits Taxes/Worker's Compensation Repairs and Maintenance 19,000,000 200,000 266,000 13,300,000 6,166,000 Purchase Price Plus Acquisiition Costs Plus Loan Fees/Costs Less Mortgages Equals Initial Investment 20% 80% 0% 100% Balance 1st 2nd Interest Amort Period 7.5% 20 Gross Rent Multiplier Periodic Pmt Pmts/Yr $13,300,000 ####### 12 12 $19,200,000 $/SQ FT or $/Unit % of GOI 1,679,200 COMMENTS/FOOTNOTES FROM CASH FLOW FORECAST of PRI ) 1,679,200 1,679,200 Utilities: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Capitalization Rate Accounting and Legal Licenses/Permits Advertising Supplies Miscellaneous Contract Services: TOTAL OPERATING EXPENSES NET OPERATING INCOME Less: Annual Debt Service Less: Participation Payments Less: Leasing Commissions Less: Funded Reserves CASH FLOW BEFORE TAXES 1,679,200 1,285,727 Cash on Cash $393,473 Loan Term 10
    28. 28. Cash Flow Analysis Worksheet Property Name Prepared For Prepared By Date Prepared HIDDEN LAKES RETAIL CI-104, CASE 3 23-Oct-13 Mortgage Data 1st Mortgage Amount Interest Rate Amortization Period Loan Term Payments/Year Periodic Payment Annual Debt Service Loan Fees/Costs 13,300,000 7.50% 20. Years 10. Years 12 107,143.89 1,285,726.74 266,000 End of Year : 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Potential Rental Income -Vacancy & Credit Losses =Effective Rental Income +Other Income (collectable) =Gross Operating Income -Operating Expenses =NET OPERATING INCOME -Interest - 1st Mortgage -Interest - 2nd Mortgage -Participation Payments -Cost Recovery - Improvements -Cost Recovery - Personal Property -Amortization of Loan Fees/Costs -Leasing Commissions =Real Estate Taxable Income Tax Liability (Savings) at 35.0% 17 18 19 20 21 22 23 24 NET OPERATING INCOME (Line 7) -Annual Debt Service -Participatipation Payments -Leasing Commissions -Funded Reserves =CASH FLOW BEFORE TAXES -Tax Liability (Savings) (Line 16) =CASH FLOW AFTER TAXES 19,000,000 200,000 266,000 13,300,000 6,166,000 Purchase Price Plus Acquisiition Costs Plus Loan Fees/Costs Less Mortgages Equals Initial Investment Cost Recovery Data 2nd Mortgage 12 - Improvements Value C. R. Method Useful Life In Service Date Date of Sale 15,360,000 SL 39 1-Jan-02 December-06 Personal Property Cost Recovery Recapture Investment Tax Credit ($$ or %) Debt Service Taxable Income Coverage Ratio 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 987,383 1,690,401 964,222 1,701,983 939,262 1,713,961 912,365 1,726,348 883,380 377,395 393,830 393,830 26,600 26,600 26,600 287,822 100,738 305,749 107,012 1 2 3 4 5 Mid-Month Convention 393,830 377,395 26,600 26,600 342,291 119,802 381,166 133,408 438,973 153,640 Cash Flow 1,679,200 1,285,727 1,690,401 1,285,727 1,701,983 1,285,727 1,713,961 1,285,727 1,726,348 1,285,727 393,473 100,738 $292,736 404,674 107,012 $297,662 416,256 119,802 $296,455 428,234 133,408 $294,826 440,621 153,640 $286,981
    29. 29. Alternative Cash Sales Worksheet Mortgage Balances End of Year: Principal Balance - 1st Mortgage Principal Balance - 2nd Mortgage TOTAL UNPAID BALANCE 1 13,001,656 $13,001,656 2 3 12,680,151 $12,680,151 12,333,687 $12,333,687 4 11,960,325 $11,960,325 5 11,557,979 $11,557,979 Calculation of Sale Proceeds PROJECTED SALES PRICE $19,324,000 (At 9.% cap) CALCULATION OF ADJUSTED BASIS: 1 Basis at Acquisition 2 +Capital Additions 3 -Cost Recovery (Depreciation) Taken 4 -Basis in Partial Sales 5 =Adjusted Basis at Sale CALCULATION OF CAPITAL GAIN ON SALE: 6 Sale Price 7 -Costs of Sale 8 -Adjusted Basis at Sale (Line 5) 9 -Participation Payment on Sale 10 =Gain or (Loss) 11 -Straight Line Cost Recovery (limited to gain) 12 -Suspended Losses 13 =Capital Gain from Appreciation Unamortized Loan Fees ITEMS TAXED AS ORDINARY INCOME: 14 Unamortized Loan Fees/Costs (negative) 15 + 16 =Ordinary Taxable Income CALCULATION OF SALES PROCEEDS AFTER TAX: 17 Sale Price 18 -Cost of Sale 19 +Balance of Funded Reserves 20 -Mortgage Balance(s) 21 -Participation Payments on Sale 22 =Sale Proceeds Before Tax 23 -Tax (Savings): Ordinary Income at 35% of line 16 24 -Tax: Straight Line Recapture at 25% of line 11 25 -Tax on Capital Gains at 15% of line 13 26 =SALE PROCEEDS AFTER TAX $19,324,000 (At 9.% cap) $19,324,000 (At 9.% cap) $19,200,000 $19,200,000 $19,200,000 1,936,280 1,936,280 1,936,280 17,263,720 17,263,720 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800 Toggle the explanatory highlights Adjusted Basis (Suggest turn off before printin (133,000) (133,000) (133,000) (133,000) (133,000) (133,000) 19,324,000 386,480 11,557,979 7,379,541 (46,550) 418,450 $7,007,641 Tax on Straight Line 11,557,979 Recapture 7,379,541 19,324,000 386,480 (46,550) 418,450 $7,007,641 19,324,000 386,480 11,557,979 7,379,541 (46,550) 418,450 $7,007,641
    30. 30. Cash Flow Analysis Worksheet Property Name Prepared For Prepared By Date Prepared HIDDEN LAKES RETAIL CI-104, CASE 3 23-Oct-13 Mortgage Data 1st Mortgage Amount Interest Rate Amortization Period Loan Term Payments/Year Periodic Payment Annual Debt Service Loan Fees/Costs 19,000,000 200,000 266,000 13,300,000 6,166,000 Purchase Price Plus Acquisiition Costs Plus Loan Fees/Costs Less Mortgages Equals Initial Investment Cost Recovery Data 2nd Mortgage 13,300,000 7.50% 20. Years 10. Years 12 107,143.89 1,285,726.74 266,000 12 - Improvements Value C. R. Method Useful Life In Service Date Date of Sale Personal Property 15,360,000 SL 39 1-Jan-02 December-06 Recapture Investment Tax Credit ($$ or %) Taxable Income End of Year : 1 2 3 4 5 6 7 Potential Rental Income -Vacancy & Credit Losses =Effective Rental Income +Other Income (collectable) =Gross Operating Income -Operating Expenses =NET OPERATING INCOME 1 2 3 4 5 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348
    31. 31. Taxable Income End of Year : 1 2 3 4 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Potential Rental Income -Vacancy & Credit Losses =Effective Rental Income +Other Income (collectable) =Gross Operating Income -Operating Expenses =NET OPERATING INCOME -Interest - 1st Mortgage -Interest - 2nd Mortgage -Participation Payments -Cost Recovery - Improvements -Cost Recovery - Personal Property -Amortization of Loan Fees/Costs -Leasing Commissions =Real Estate Taxable Income Tax Liability (Savings) at 35.0% 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 1,690,401 1,701,983 1,713,961 1,726,348 1,679,200 987,383 1,690,401 964,222 1,701,983 939,262 1,713,961 912,365 1,726,348 883,380 377,395 393,830 393,830 393,830 377,395 26,600 26,600 26,600 26,600 26,600 287,822 100,738 305,749 107,012 342,291 119,802 381,166 133,408 438,973 153,640 17 18 19 20 21 22 23 24 NET OPERATING INCOME (Line 7) -Annual Debt Service -Participatipation Payments -Leasing Commissions -Funded Reserves =CASH FLOW BEFORE TAXES -Tax Liability (Savings) (Line 16) =CASH FLOW AFTER TAXES 1,679,200 1,285,727 1,690,401 1,285,727 1,701,983 1,285,727 1,713,961 1,285,727 1,726,348 1,285,727 393,473 100,738 $292,736 404,674 107,012 $297,662 416,256 119,802 $296,455 428,234 133,408 $294,826 440,621 153,640 $286,981 Cash Flow
    32. 32. Alternative Cash Sales Worksheet Mortgage Balances End of Year: Principal Balance - 1st Mortgage Principal Balance - 2nd Mortgage TOTAL UNPAID BALANCE 1 13,001,656 $13,001,656 2 12,680,151 $12,680,151 3 12,333,687 $12,333,687 4 11,960,325 $11,960,325 5 11,557,979 $11,557,979 Calculation of Sale Proceeds PROJECTED SALES PRICE $19,324,000 (At 9.% cap) CALCULATION OF ADJUSTED BASIS: 1 Basis at Acquisition 2 +Capital Additions 3 -Cost Recovery (Depreciation) Taken 4 -Basis in Partial Sales 5 =Adjusted Basis at Sale CALCULATION OF CAPITAL GAIN ON SALE: 6 Sale Price 7 -Costs of Sale 8 -Adjusted Basis at Sale (Line 5) 9 -Participation Payment on Sale 10 =Gain or (Loss) 11 -Straight Line Cost Recovery (limited to gain) 12 -Suspended Losses 13 =Capital Gain from Appreciation $19,324,000 (At 9.% cap) $19,324,000 (At 9.% cap) $19,200,000 $19,200,000 $19,200,000 1,936,280 1,936,280 1,936,280 Toggle the (Sugge 17,263,720 17,263,720 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800
    33. 33. CALCULATION OF ADJUSTED BASIS: 1 Basis at Acquisition 2 +Capital Additions 3 -Cost Recovery (Depreciation) Taken 4 -Basis in Partial Sales 5 =Adjusted Basis at Sale CALCULATION OF CAPITAL GAIN ON SALE: 6 Sale Price 7 -Costs of Sale 8 -Adjusted Basis at Sale (Line 5) 9 -Participation Payment on Sale 10 =Gain or (Loss) 11 -Straight Line Cost Recovery (limited to gain) 12 -Suspended Losses 13 =Capital Gain from Appreciation ITEMS TAXED AS ORDINARY INCOME: 14 Unamortized Loan Fees/Costs (negative) 15 + 16 =Ordinary Taxable Income CALCULATION OF SALES PROCEEDS AFTER TAX: 17 Sale Price 18 -Cost of Sale 19 +Balance of Funded Reserves 20 -Mortgage Balance(s) 21 -Participation Payments on Sale 22 =Sale Proceeds Before Tax 23 -Tax (Savings): Ordinary Income at 35% of line 16 24 -Tax: Straight Line Recapture at 25% of line 11 25 -Tax on Capital Gains at 15% of line 13 26 =SALE PROCEEDS AFTER TAX $19,200,000 $19,200,000 $19,200,000 1,936,280 1,936,280 1,936,280 Toggle the (Sugge 17,263,720 17,263,720 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 19,324,000 386,480 17,263,720 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800 1,673,800 (133,000) (133,000) (133,000) (133,000) (133,000) (133,000) 19,324,000 386,480 19,324,000 386,480 19,324,000 386,480 11,557,979 11,557,979 11,557,979 7,379,541 (46,550) 418,450 $7,007,641 7,379,541 (46,550) 418,450 $7,007,641 7,379,541 (46,550) 418,450 $7,007,641
    34. 34. OF $ (6,166,000) 393,473 404,674 416,256 428,234 440,621 + 7,379,541 9.95% NPV= $0 @ 9.95% Alternative 2 n 0 1 2 3 4 5 IRR= NPV= $0 @ 9.95% NPV= $0 @ 7.13% Cap rate used on Sale = 9.% n 0 1 2 3 4 5 IRR= $ (6,166,000) 292,736 297,662 296,455 294,826 286,981 + 7,007,641 7.13% NPV= $0 @ 7.13% Cap rate on Sale = 9.% $ (6,166,000) 393,473 404,674 416,256 428,234 440,621 + 7,379,541 9.95% NPV= $0 @ 9.95% Alternative 3 n 0 1 2 3 4 5 IRR= $ (6,166,000) 292,736 297,662 296,455 294,826 286,981 + 7,007,641 7.13% NPV= $0 @ 7.13% Cap rate on Sale = 9.% R E T U R N $ (6,166,000) 292,736 297,662 296,455 294,826 286,981 + 7,007,641 7.13% Alternative 3 n 0 1 2 3 4 5 IRR= AFTER TAX Alternative 2 Alternative 1 n 0 1 2 3 4 5 IRR= $ (6,166,000) 393,473 404,674 416,256 428,234 440,621 + 7,379,541 9.95% O F RAT ES Alternative 1 n 0 1 2 3 4 5 IRR= R A T E S I NT ERNAL BEFORE TAX I N T E R N A L RET UR N IRR & NPV
    35. 35. How much should I pay? n 0 1 2 3 4 5 IRR= $ (6,166,000) 292,736 297,662 296,455 294,826 286,981 + 7,007,641 7.13% NPV= ($700,388) @ 10.% Impressed?
    36. 36. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    37. 37. CCIM Institute Note: Do not enter any inf ormation on this sheet. All values are derived f rom the Input Sheet. Equipping the world’s best minds in commercial real estate Cash Flow Analysis Worksheet Property Name HIDDEN KAKES RETAIL Acquisition Price $19,000,000 Location Plus Acquisition Costs Type of Property Plus Loan Costs $266,000 Minus Mortgages $13,300,000 Size of Property (sf/units) 103,000 Purpose of Analysis $200,000 Equals Initial Investment $6,166,000 Prepared by Date Prepared October 24, 2013 MORTGAGE DATA 1st Mortgage Amount COST RECOVERY DATA 2nd Mortgage $13,300,000 Interest Rate Improvements Value 7.50% BASIS DATA Personal Property $15,360,000 C. R. Method Acquisition Price SL SL Acquisition Costs Amortization Period 20 Useful Life 39.0 Loan Term 10 In Service Date 1-Jan 1-Jan 31-Dec 31-Dec Payments/Year Periodic Payment 12 Date of Sale $107,143.89 Annual Debt Service 12 Months % age 2.564% 11.5 Months % age $1,285,727 Loan Fees/Costs Total Acquisition Basis 2.457% $266,000 TAXABLE INCOME End of Year 1 POTENTIAL RENTAL INCOME 2 EFFECTIVE RENTAL INCOME 4 GROSS OPERATING INCOME 6 NET OPERATING INCOME 8 -Interest-First Mortgage 9 4 5 6 TOTAL OPERATING EXPENSES 7 3 +Other Income (collectable) 5 2 -Vacancy & Credit Losses 3 1 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157 $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 $1,739,157 $987,382 $964,222 $939,262 $912,365 $883,380 -Interest-Second Mortgage $377,395 $393,830 $393,830 $393,830 $377,395 $26,600 $26,600 $26,600 $26,600 $26,600 15 REAL ESTATE TAXABLE INCOME $287,823 $305,749 $342,291 $381,166 $438,973 16 Tax Liability (Savings) at 35% $100,738 $107,012 $119,802 $133,408 $153,640 17 NET OPERATING INCOME (Line 7) $1,679,200 $1,690,401 $1,701,983 $1,713,961 $1,726,348 18 -Annual Debt Service $1,285,727 $1,285,727 $1,285,727 $1,285,727 $1,285,727 22 CASH FLOW BEFORE TAXES $393,473 $404,674 $416,256 $428,234 $440,621 23 -Tax Liability (Savings) (Line 16 ) $100,738 $107,012 $119,802 $133,408 $153,640 24 CASH FLOW AFTER TAXES $292,735 $297,662 $296,455 $294,826 $286,981 10 -Cost Recovery-Improvements 11 -Cost Recovery-Personal Property 12 -Loan Costs Amortization 13 14 - CASH FLOW 19 20 21 -
    38. 38. CCIM Institute Note: Do not enter any inf ormation on this sheet. All values are derived f rom the Input Sheet. Equipping the world’s best minds in commercial real estate Cash Sale Worksheet MORTGAGE BALANCES 1 End of Year: 2 Principal Balance - 1st Mortgage 1 2 3 4 5 $13,001,656 $12,680,150 $12,333,686 $11,960,325 $13,001,656 $12,680,150 $12,333,686 $11,960,325 6 $11,557,979 $11,557,979 3 Principal Balance - 2nd Mortgage 4 TOTAL UNPAID BALANCE CALCULATION OF SALE PROCEEDS 5 END OF YEAR 1 6 PROJECTED SALES PRICE (Rounded to nearest 000) 2 3 4 5 $19,324,000 CALCULATION OF ADJUSTED BASIS 7 Basis at Acquisition $19,200,000 8 +Capital Additions 9 -Cost Recovery (Depreciation) Taken $1,936,280 10 -Basis in Partial Sales 11 =Adjusted Basis at Sale $17,263,720 CALCULATION OF CAPITAL GAIN ON SALE 12 Sale Price 13 -Costs of Sale 14 -Adjusted Basis at Sale (Line 11) $19,324,000 $386,480 $17,263,720 15 16 =Gain or (Loss) $1,673,800 17 -Straight Line Cost Recovery (limited to gain) (Line 9) $1,673,800 18 -Suspended Losses 19 =Capital Gain from Appreciation ITEMS TAXED AS ORDINARY INCOME 20 Unamortized Loan Fees/Costs (negative) ($133,000) 21 + 22 =Ordinary Taxable Income ($133,000) CALCULATION OF SALE PROCEEDS 23 Sale Price 24 Cost of Sale $19,324,000 $386,480 25 -Participation Payments on Sale 26 -Mortgage Balance(s) $11,557,979 27 +Balance of Funded Reserves 28 =SALE PROCEEDS BEFORE TAX $7,379,541 29 -Tax (Savings)on Ordinary Income (Line 22 x 35%) ($46,550) 30 -Tax on Cost Recovery Recapture (Line 17 x 25%) $418,450 31 -Tax on Capital Gain (Line 19 x 15%) 32 =SALE PROCEEDS AFTER TAX $7,007,641 6
    39. 39. Investment Benchmarks Legend CCIM Institute Input Cells Equipping the world’s best minds in commercial real estate Measures of Investment Performance Before Tax EOY 0 1 2 3 4 5 IRR = $ ($6,166,000) $393,473 $404,674 $416,256 $428,234 $440,621 + $7,379,541 After Tax EOY 0 1 2 3 4 5 9.95% NPV @ End of Year Value Using Acquisition Cap Rate Loan Balance Loan to Value Debt Service Coverage Ratio Return on Asset Before Tax Cash on Cash After Tax Cash on Cash Acquisition Cap Rate Gross Rent Multiplier Effective Tax Rate $ ($6,166,000) $292,735 $297,662 $296,455 $294,826 $286,981 IRR = 1 $19,127,000 $13,001,656 67.98% 1.31 8.84% 6.38% 4.75% 8.84% 11.31 28.29% 2 $19,258,000 $12,680,151 65.84% 1.31 8.90% 6.56% 4.83% 10.00% + $7,007,641 7.13% NPV @ = Formula Cells 3 $19,393,000 $12,333,687 63.60% 1.32 8.96% 6.75% 4.81% 4 $19,533,000 $11,960,326 61.23% 1.33 9.02% 6.95% 4.78% = 5 $19,678,000 $11,557,979 58.74% 1.34 9.09% 7.15% 4.65% ($700,388) 6
    40. 40. Discount Rate Sensitivity EOY 10 Sales Price Purchase $4,418,000 Lease $0 0% 2% 4% 6% 8% 10% 12% 14% After Tax Net Present Value ($200,000) ($400,000) ($600,000) ($800,000) ($1,000,000) ($1,200,000) ($1,400,000) 6.15% ($1,600,000) ($1,800,000) ($2,000,000) Discount Rate 16% 18% 20% 22% 24%
    41. 41. Sales Price Sensitivity Discount Rate 9.00% $0 After Tax Net Present Value ($1,000,000) ($2,000,000) ($3,000,000) $20,069,6 ($4,000,000) ($5,000,000) ($6,000,000) ($7,000,000) EOY 10 Sales Price (000) Purchase Lease
    42. 42. Are they really interested or just shopping? How do I get them to like me and trust me? How do I get them to make a decision? What can I do to make this more interesting? Will they understand the terminology? Should I dig into the details or keep it simple? Will they understand the lingo? How much time will I need to make my point?
    43. 43. REIWISE @ STDB.com
    44. 44. planEASE @ www.planease.com
    45. 45. The CCIM Millionaire Next Door An astounding 85 percent of self-made millionaires in America admitted that they were no more intelligent or talented then others, but they “worked much harder” than anyone else, for a much longer time. The Millionaire Next Door, Stanley & Danko
    46. 46. What can I do? • • • • • • • • • Qualify and don’t waste anyone’s time Let them know they’re important Give your trust & earn their trust Use all of your knowledge & skills Avoid jargon Read and understand your audience Be brief (you can always elaborate) Get them involved & use visuals Ask for the order
    47. 47. Thank you for attending! Steven R. Price, CCIM Price Properties, Inc. Colorado Springs, Colorado steve@stevepriceccim.com

    ×