The document provides an overview of key concepts for evaluating commercial properties, including how to determine the value of a property based on its net operating income. It discusses how to calculate a property's effective gross income, net operating income, capitalization rate, gross rent multiplier, cost per unit, and debt service coverage ratio. The document also covers leverage, loan-to-value ratios, and cash-on-cash returns. Examples are provided to illustrate each concept.
What You Really Need to Know about Commercial Real Estate UnderwritingColleen Beck-Domanico
Prudent real estate underwriting uses quantitative analysis. However, real estate math isn't just a black‐and‐white exercise, nor is it simple formula lending. Many qualitative judgments feed into your estimates of property cash flow, coverage, and value that come from quantitative analysis. Your analysis should be completed in the context of the qualitative credit risk assessment. Doing so will avoid over‐advancing on potentially weak property cash flow streams that will jeopardize repayment prospects and bank portfolio quality. This presentation looks at quantitative analysis and integrating qualitative factors; underwriting guidelines; regulatory guidance; and value and cash flow analyses.
This document provides a detailed overview of the financial analysis and underwriting process for a typical real estate development project, and highlights important features such as Performance Metrics, Capitalization, Sources & Uses, Development Budget, Annual & Quarterly Cash Flows / Proforma, Monte Carlo Simulation, Waterfall Structure, and more.
As the markets for real estate usually remain stable in many areas of in the world, opportunities continue to exist for the development of real estate projects. This lecture is designed to analyze the real estate development process primarily from the perspective of the developer. The lecture concentrates on the development of a real estate project from its conceptual ideas until the operational start-up, and from the initiation of the concept designs until the project is defined.
The lecture examines most of the phases of the development process, from idea inception through studying the various available options for the use of the lands and estimating the projects' costs and income to determine the best and optimum commercial use of the lands. This includes an overview about the development of the project's financial feasibility of real estate development, which involves the identification and evaluation of critical assumptions related to the creation, construction, and operation of economically viable commercial real estate projects.
The lecture is introductory in scope and assumes attendants have little or no experience with the development process.
An understanding of the real estate development process benefits not only potential developers, but investors, lenders, builders, public sector participants, and end-users of the products as well.
What You Really Need to Know about Commercial Real Estate UnderwritingColleen Beck-Domanico
Prudent real estate underwriting uses quantitative analysis. However, real estate math isn't just a black‐and‐white exercise, nor is it simple formula lending. Many qualitative judgments feed into your estimates of property cash flow, coverage, and value that come from quantitative analysis. Your analysis should be completed in the context of the qualitative credit risk assessment. Doing so will avoid over‐advancing on potentially weak property cash flow streams that will jeopardize repayment prospects and bank portfolio quality. This presentation looks at quantitative analysis and integrating qualitative factors; underwriting guidelines; regulatory guidance; and value and cash flow analyses.
This document provides a detailed overview of the financial analysis and underwriting process for a typical real estate development project, and highlights important features such as Performance Metrics, Capitalization, Sources & Uses, Development Budget, Annual & Quarterly Cash Flows / Proforma, Monte Carlo Simulation, Waterfall Structure, and more.
As the markets for real estate usually remain stable in many areas of in the world, opportunities continue to exist for the development of real estate projects. This lecture is designed to analyze the real estate development process primarily from the perspective of the developer. The lecture concentrates on the development of a real estate project from its conceptual ideas until the operational start-up, and from the initiation of the concept designs until the project is defined.
The lecture examines most of the phases of the development process, from idea inception through studying the various available options for the use of the lands and estimating the projects' costs and income to determine the best and optimum commercial use of the lands. This includes an overview about the development of the project's financial feasibility of real estate development, which involves the identification and evaluation of critical assumptions related to the creation, construction, and operation of economically viable commercial real estate projects.
The lecture is introductory in scope and assumes attendants have little or no experience with the development process.
An understanding of the real estate development process benefits not only potential developers, but investors, lenders, builders, public sector participants, and end-users of the products as well.
This real estate financial consulting book lists / exhibits some of the advisory work we typically do.
• Evaluation of Lease, Sublease, Purchase, or Sale-Leaseback
• Occupancy Cost Analysis
• Lease Comparison Analysis
• Space Consolidation Scenarios
• Cash and GAAP Perspectives
• Impact of Purchase or Lease Transactions on Financial Statements
• Comparison of Portfolio Value vs. Outstanding Obligation
• Portfolio Analysis vs. Business Strategy
• Own vs. Lease Decision
• Operating vs. Capital Lease
• Evaluation and Assessment of Investment Opportunities
• Valuation of Individual Assets or Real Estate Portfolios
• Development Analysis and Project Financial Feasibility
• Optimal Holding Period Analysis
• Benchmarking Based on Key Measurement Metrics
• Detailed Sensitivity or What If Analysis
• Review and Preparation of Lease Abstracts
• Preparation of Detailed Cash Flows
• Market Research
This document provides an overview on real estate development and financial feasibility.
Topics Covered:
Development - Process, Ecosystem, Model, Flowchart, Risk vs Value, Development Risk, Development Cycle, Key Categories of Tasks
Economic Feasibility - Financial, Development Budget, Static Analysis, Loan-to-Cost, Debt Cover & Default Ratio Approaches, Detailed Proforma & Analysis
Estimating the value of a real estate is a key element to real estate financing, listing for sale, property insurance, investment analysis, and taxation. For most instances, figuring the asking price of a property is the typical application of a real estate valuation. However, the methods and basic concepts remain the same for any application.
03 Construction Project Planning and Schedulingakashpadole
The presentation has prepared as per the syllabus of Mumbai University.
Go through the presentation, if you like it then share it with your friends and classmates.
Thank you :)
Payback period (PP) is the number of years it takes for a company to recover its original investment in a project, when net cash flow equals zero. In the calculation of the payback period, the cash flows of the project must first be estimated. The payback period is then a simple calculation.
Real Estate Development Case PresentationDaniel Mandel
In one week, my group (Nurulauni Saniman, Maike Zhang, Yuhua Zhou) and I analyzed a development case with an existing office building and adjacent vacant land for development. Group created a 20-minute investor presentation analyzing the macro economy, purchase price of entire site and adjacent vacant land, and optimization of the capital structure to reduce the weighted average cost of capital for the project.
The Sale-Leaseback (SLB) Advantage: This document provides an overview on the advantages of a real estate Sale-Leaseback Transaction. Information could be of interest to middle-market companies, private equity firms with portfolio companies and/or owner-users of real estate.
This presentation will give you a firm introduction to the types of investments, and how to calculate a 'good' vs a 'bad' investment, including all of the required formulas and terms you must be familiar with, such as NOI, ROI, CAP and more.
This real estate financial consulting book lists / exhibits some of the advisory work we typically do.
• Evaluation of Lease, Sublease, Purchase, or Sale-Leaseback
• Occupancy Cost Analysis
• Lease Comparison Analysis
• Space Consolidation Scenarios
• Cash and GAAP Perspectives
• Impact of Purchase or Lease Transactions on Financial Statements
• Comparison of Portfolio Value vs. Outstanding Obligation
• Portfolio Analysis vs. Business Strategy
• Own vs. Lease Decision
• Operating vs. Capital Lease
• Evaluation and Assessment of Investment Opportunities
• Valuation of Individual Assets or Real Estate Portfolios
• Development Analysis and Project Financial Feasibility
• Optimal Holding Period Analysis
• Benchmarking Based on Key Measurement Metrics
• Detailed Sensitivity or What If Analysis
• Review and Preparation of Lease Abstracts
• Preparation of Detailed Cash Flows
• Market Research
This document provides an overview on real estate development and financial feasibility.
Topics Covered:
Development - Process, Ecosystem, Model, Flowchart, Risk vs Value, Development Risk, Development Cycle, Key Categories of Tasks
Economic Feasibility - Financial, Development Budget, Static Analysis, Loan-to-Cost, Debt Cover & Default Ratio Approaches, Detailed Proforma & Analysis
Estimating the value of a real estate is a key element to real estate financing, listing for sale, property insurance, investment analysis, and taxation. For most instances, figuring the asking price of a property is the typical application of a real estate valuation. However, the methods and basic concepts remain the same for any application.
03 Construction Project Planning and Schedulingakashpadole
The presentation has prepared as per the syllabus of Mumbai University.
Go through the presentation, if you like it then share it with your friends and classmates.
Thank you :)
Payback period (PP) is the number of years it takes for a company to recover its original investment in a project, when net cash flow equals zero. In the calculation of the payback period, the cash flows of the project must first be estimated. The payback period is then a simple calculation.
Real Estate Development Case PresentationDaniel Mandel
In one week, my group (Nurulauni Saniman, Maike Zhang, Yuhua Zhou) and I analyzed a development case with an existing office building and adjacent vacant land for development. Group created a 20-minute investor presentation analyzing the macro economy, purchase price of entire site and adjacent vacant land, and optimization of the capital structure to reduce the weighted average cost of capital for the project.
The Sale-Leaseback (SLB) Advantage: This document provides an overview on the advantages of a real estate Sale-Leaseback Transaction. Information could be of interest to middle-market companies, private equity firms with portfolio companies and/or owner-users of real estate.
This presentation will give you a firm introduction to the types of investments, and how to calculate a 'good' vs a 'bad' investment, including all of the required formulas and terms you must be familiar with, such as NOI, ROI, CAP and more.
Why Income Property In Long Beach California ShortBill Stayart
How To Evaluate Residential Income Property 1 to 4 units & Commercial 5units or more. What is GSI & the Gross Multiplier? How do I compute this? Why is this important? What is a 1031 Exchange..? All these questions and more are answered for you in this short slideshare...
Cash on Cash is a very popular ratio in commercial investment real estate, and is typically produced in most investment analysis. I like to think of the Cash on Cash ratio as telling me how much cash I receive on my cash investment. Because the Cash on Cash ratio takes financing into account, the investment used in the calculation is how much the owner had to invest of his own money, and the cash received is the amount less the debt payment, which is the amount the owner actually gets. For this reason the ratio can be really helpful when the owner is looking for an investment that to produce income during the period that it is owned.
If you own one or many self storage properties and have wondered why you might hire a third party management firm, I bring you "Property A" as an example of what Store Here Management might be able to do for you. Contact us for an open discussion.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
Real Estate Investing 101: Financial AnalysisPeerRealty
This is the presentation deck from Real Estate Investing 101: Financial Analysis, PeerRealty's first in a series of on-demand educational videos. In this series, PeerRealty Head of Investments Jeff Rothbart takes viewers through the fundamentals of real estate investing, and discusses some of the key metrics that real estate investors should consider. This first course, Financial Analysis, discusses concepts like net operating income, cap rates, and internal rate of return.
You can view this webinar at http://resources.peerrealty.com/real-estate-investing-101-financial-analysis
Handout: Math, Math. (And only then, Location)Betty Kincaid
Betty Kincaid, PMN teaches you how to:
-Work with investors to increase
your business.
-Calculate a property’s rate of
return.
-Explain to your clients why they
should own investment property.
-Demonstrate the value of a real
estate investment versus stocks or
bonds.
THIS slideshare be focusing on FUNDING. If you work with (or want to work with) INVESTOR buyers, understanding the unique funding options for these buyers is a MUST.
You will learn about:
• The 3 most important things an Equity Partner looks for.
• Hard Money Loans: How to get them and how to make them work for you.
• Private Lenders and Trust Deeds
• Leverage: When it helps & when it hurts.
• How to determine what source of funding is right for your client.
This workshop series covers the 5 F's of Residential Redevelopment: Finding, Feasibility, Funding, Fixing, and Flipping. In our upcoming workshop,
These are the current floor plans and the drawings of the future floor plans.
When buying a property it is important to see if you can improve upon the existing floor plans within a reasonable budget. This is one of the biggest bangs for your buck when flipping properties.
The lesson An Overview of the Best Practices Brokering Apartment Buildings discusses the ideal way to list and sell small and medium apartment buildings. The lesson gives insight into what it takes to be successful and sustain a significant income in apartment brokerage. Techniques discussed include: how to generate leads, how to qualify sellers, making a strong proposal, how to market apartments, methods to use when representing buyers and resources that are available to the apartment broker. The lesson is ideal for any real estate professional already involved in the commercial marketplace and the beginner alike.
Elegant Evergreen Homes - Luxury Apartments Redefining Comfort in Yelahanka, ...JagadishKR1
Experience unmatched luxury at Elegant Evergreen Homes, offering exquisite 2, 3, and 4 BHK apartments in the serene locality of Yelahanka, Bangalore. These meticulously crafted homes blend modern design with timeless elegance, providing a harmonious living environment. Enjoy top-tier amenities and a prime location, making Elegant Evergreen Homes the ideal choice for discerning homeowners.
Omaxe Sports City Dwarka stands out as a premier residential and recreational destination, offering a blend of luxury and sports-centric living. Located in the thriving area of Dwarka, this project by Omaxe Limited is designed to cater to modern lifestyle needs while promoting a healthy, active living environment.
The SVN® organization shares a portion of their new weekly listings via their SVN Live® Weekly Property Broadcast. Visit https://svn.com/svn-live/ if you would like to attend our weekly call, which we open up to the brokerage community.
One FNG by Group 108 Sector 142 Noida Construction UpdateOne FNG
One FNG by Group 108 is launching a new commercial project in Sector 142 Noida. Office space and high street retail shops on the FNG and Noida Expressway. For more information visit the website https://www.onefng.com/
Referans Bahcesehir which is being constructed, in the center of the most regional destination as Bahçeşehir, shines out with its central location and unique landscape including social facilities such as a fitness center, sauna, sports facilities, children’s playground and recreational areas.
Not only drawing attention for immediate surroundings including commercial centers and private schools but also providing the easily accessible location with closeness to Tem Highway and connection roads, ongoing construction of 3rd Bridge Connection roads and Metro Projects
Bahcesehir is a rising value in the great city of Istanbul… Located at a new transportation junction in the northwest of the City… Located at such a spot that the access roads for the 3rd bridge and for the 3rd Airport will reach the region in 2016. The Marmaray and the Subway will extend all the way to Referans Bahcesehir respectively in 2018 and 2019.
465 flats and 34 stores are designed with an outstanding approach and arranged with a unique perspective offering the following options: 1 plus 1, 2 plus 1, 3 plus 1, 3.5 plus 1, 4 plus 1, and 4.5 plus 1. It is planned so as to safeguard you and your loved ones based upon a modern, technological safety approach. As you experience the joy and luxury here, you will be content and feet at ease.
It is worth seeing both inside and outside with heart-warming cafes, tasty restaurants and elegant stores… And it is ready to offer a vivacious social life with a warm and cozy space design.
A folding swimming pool and indoor swimming pools, playgrounds, Turkish bath, sauna… It has them all. Everything you need for your well-being and for having a pleasant time will be at your service. You simply need to align the rhythm of life with the rhythm of Referans Bahcesehir.
https://listingturkey.com/property/referans-bahcesehir/
Brigade Insignia offers meticulously designed apartments with modern architecture and premium finishes. The project features spacious 3,3.5,4 and 5 BHK units, each thoughtfully planned to provide maximum comfort, natural light, and ventilation.
https://www.newprojectbangalore.com/brigade-insignia-yelahanka-bangalore.html
Flat available for sale
Location- Tupudana, Ranchi
Savitri enclave
Area- 3BHK
Rate- 4000/sq.ft.
Super Build Up Area-1629 sq.ft.
Build-up area-1253 sq.ft.
Rate- 65lakh16k(approx)
Floor available- Flat available in all floor(G+12)
Balcony- 2
Washroom- 2
Parking - CAR PARKING
Amenities- Joggers track,temple, children's park,gym,banquet hall (5 Lakh)
Possession year (Handover year)- Dec 2025
Outside View from the apartment and flat balcony is very beautiful.
For more information contact AASHIYANA STAR PROPERTIES
7766900371
Investing In The US As A Canadian… And How To Do It RIGHT!! (feat. Erwin Szet...Volition Properties
=== Investing In The US As A Canadian… And How To Do It RIGHT!! (feat. Erwin Szeto) ===
Ever been curious about Real Estate Investing in the US?? At Volition, for the past 14 years, we have been focused on helping investors invest in over $250M of real estate and generate $100M of wealth in the Toronto market, but we are always open to learning more about other business models and learning from other investors.
The US has always been an intriguing market to invest in. But the US is a big place… if you’re interested in investing in the US, you probably have a lot of questions, like:
☑️ Specifically WHERE should you invest?
☑️ What are the best markets to invest in and why?
☑️ How much are property prices there?
☑️ What are the returns like?
☑️ What is cashflow like?
☑️ Compared to investing in Toronto or other cities in Ontario, what are the benefits / tradeoffs?
☑️ What ownership structure should I use?
☑️ What are the tax implications?
☑️ Can I get financing?
☑️ What are tenants like?
Enter Erwin Szeto, a longtime friend of Volition. Since 2005, Erwin Szeto and his team have navigated the challenging landscape of being landlords in Ontario. Now, they are shifting their focus and guiding their clients' investments toward the more landlord-friendly environment of the USA. This decision comes after assisting Canadian clients in transacting over $440,000,000 in income properties. Faced with issues like affordability constraints, tenant-friendly laws, rent control, and rental licensing in Canada, Erwin sees a clear opportunity in the U.S. Here, there is a significant influx of investments leading to the creation of high-paying manufacturing jobs. Erwin and his clients are poised to capitalize on these opportunities where landlord rights are stronger and there is no rent control.
To facilitate this transition, Erwin has partnered with and become a client of SHARE, a one-stop-shop U.S. Asset Manager. Founded by Canadians for Canadians, SHARE enables as passive an ownership experience as possible for landlords in the U.S., while still maintaining direct, 100% ownership.
Erwin is “Making Real Estate Investing Great Again”!!
Website: https://www.infinitywealth.ca/
Facebook: https://www.facebook.com/iwinrealestate and https://www.facebook.com/ErwinSzetoOfficial
Podcast: https://www.truthaboutrealestateinvesting.ca/
Instagram: https://www.instagram.com/iwinrealestate/ and https://www.instagram.com/erwinszeto/
BricknBolt Understanding Load-Bearing Walls and Their Structural Support in H...BrickAndBolt
Load-bearing walls are the backbone of any home construction, providing crucial structural support that carries the weight of the house above. For companies like Brick and Bolt Mysore and Bricknbolt Faridabad, understanding and properly implementing these elements are key to constructing safe and durable buildings.
Green Homes, Islamabad Presentation .pdfticktoktips
Green Homes Islamabad offers beautifully designed 5, 8, and 10 Marla homes near the airport and motorway. Enjoy luxury, convenience, and high rental returns in a prime location.
500 acres of brilliance await you here at Riverview City which offers modern living, effortless convenience, and a beautiful natural setting. It is a mega township by Magarpatta City in Loni Kalbhor, Pune. Enjoy easy access to work, schools, and fun while experiencing a perfect work-life balance.
Visit - magarpattacity.developerprojects.in
Avrupa Konutlari Yenimahalle - Listing TurkeyListing Turkey
Welcome to Avrupa Konutları Yenimahalle, where luxury living meets unparalleled convenience in the heart of Istanbul. Developed by Artaş Holding, one of Turkey’s leading construction companies, this prestigious residential project offers a contemporary lifestyle experience like no other.
https://listingturkey.com/property/avrupa-konutlari-yenimahalle/
Torun Center Residences Istanbul - Listing TurkeyListing Turkey
THERE IS LIFE IN ITS CENTER!
The most energetic spot of the city that will add utterly different pleasures to your life, with a park that will make Istanbul breathe, delighting indoor and outdoor bistros, cafes, restaurants, the brand-new Food Hall concept, where dozens of unique tastes are served together, market area, cinema, theater, fitness club, SPA and event venue...
All the pleasures that will enrich your lives are awaiting you on the most beautiful side of the city, at Torun Center Residences. In Mecidiyeköy, where the heart of Istanbul beats, business, life and entertainment opportunities are located at the exact center, at Torun Center, the most beautiful side of the city.
Penthouse apartments and different styles of flats from 1 + 1 to 4 + 1, from 100 to 425 square meters in a 42-story residence tower, have been designed for those who want to live in the center of magnificence. Torun Center is the redefinition of a better life with specially landscaped floor gardens, apartment options with private balconies, and automatic glass systems equipped with Trickle Ventilation that offers clean air comfort.
Business and life in the same place
Excellent service
Torun Center has many delightful details, from a swimming pool to sunbathing and resting terrace. With 24/7 concierge services, 24/7 security, valet, technical service, closed-circuit camera system (CCTV), central heating and cooling system, it makes your life easier.
Delightful details
The two-story Torun Center Lounge, with its indoor and outdoor seating areas, children's playroom, private dining and TV lounge, promises unforgettable memories to you and your loved ones with its unique Istanbul view.
Neighboring to the most pleasant square of Istanbul
A few steps from the Torun Center Residences, you can reach the city's most modern city square and open the doors of a quality city life. Torun Center Residences brings together on the same project the long-awaited city life for Istanbul and gourmet restaurants, cafes, gym and SPA, and state-of-the-art cinema and Artı Stage, hosting the most famous plays of the season.
Located at the intersection of alternative public transportation options such as the metro and Metrobus, Torun Center comes to the fore as the most accessible office for both sides of Istanbul. With a central location and rich transportation lines, Torun Center offices make life easier for employees and increase productivity.
Need MCA leads? No sweat! MCAs are great for small biz funding. Learn how to snag top-notch leads: businesses needing cash, with repayment ability, decision-makers, and accurate contacts. Use content, social ads, lead platforms, partnerships, and capture processes for quality leads.
https://www.leadgeneration.media/blog/b/streamline-your-mca-sales-process-with-pre-qualified-leads
Keep Your Home Naturally Cool and Warm Out Change in Seasons
Vinra Construction is a private limited company registered under the ROC. The management has an experience of over 15 years of understanding the needs and delivering apt solutions to the end users We are providing turnkey solutions in construction fields. like Construction, Interior Designing Facility Management, Plantation Management, etc..
Vinra Construction Tech Enabled Company for Eco-Friendly Home Construction
Contact With Vinra for a Greener Future >>> Call us @ 888 4898 765
Simpolo Tiles & Bathware
Tile ho,
toh Simpolo.
Since the first steps were taken in 1977, Simpolo Ceramics has carved its niche as a consistently growing organisation with unparalleled innovation and passion rooted in simplicity.
We endure gratification for every experience we offer, created to share something meaningful. It may not resonate with the majority, but that makes us a class apart. If only a handful were to understand the purpose of our existence, we would be proud to have found our believers. Rather, people with whom we can share our beliefs.
VISUALIZER
Design your space in your style with our very own Visualizer. Now, you can choose the tiles of your liking from our wide selection and see how they would look in a space. Select the tile from the multiple options and the visualiser will replace the surfaces in the image with the selected tiles. This way, instead of just your imagination, you can choose the tiles for your place by getting an actual picture of how they would look in a space. So, design your space the way you desire digitally and implement it in real life to get the best results!
You can also share this visualiser with others to help them design their space.
Committed to delighting customers with world-class ceramic products and services. Make Simpolo synonymous with the best quality and set new benchmarks of excellence for all stakeholders. Pursue best business practices with utmost integrity to make Simpolo an exciting organisation to work with, for vendors, channel partners, investors and employees alike.
Gain worldwide recognition in the field of ceramic building products through Research and Innovation and bring an enhanced lifestyle within reach for every household.
Urbanrise Paradise on Earth - Unveiling Unprecedented Luxury in Exquisite Vil...JagadishKR1
Immerse yourself in the epitome of luxury living at Urbanrise Paradise on Earth. These opulent 4 BHK villas, nestled off the prestigious Kanakapura Road in Bangalore, redefine elegance and sophistication. With meticulous craftsmanship, breathtaking design, and unparalleled amenities, Urbanrise Paradise on Earth offers a sanctuary where every moment is infused with luxury and serenity. Experience a life of grandeur and indulgence at this exclusive residential enclave.
Lixin Azarmehr, a Los Angeles-based real estate development trailblazer, co-founded JL Real Estate Development (JL RED) in 2015 and serves as its CEO. Her expertise has propelled the firm to specialize in luxury residential and mixed-use commercial projects, with a portfolio that features upscale retail spaces and sophisticated care facilities.
1. Evaluating Commercial
Properties 101
Presented by
Curtis Gabhart and
David Stankaitis, CCIM
www.GabhartInvestments.com
2. Overview
Value of Property: What is it and how is it determined?
Getting to the NOI
Ok, so I have the NOI, now what?
CAP, GRM, CPU, Cost per SF
Lending Basics
Leverage, LTV, DSCR
Cash on Cash Return (ROI)
Review
Q&A
www.GabhartInvestments.com
3. Value of Property
Definition:
The most probable price (in
terms of money) which a
property should bring in a
competitive and open
market under all conditions
requisite to a fair sale, the
buyer and seller each acting
prudently and
knowledgeably, and
assuming the price is not
affected by undue stimulus.
www.GabhartInvestments.com
4. Value of Property, cont’d
As an investor, value is
related to the specific
purpose for which you
have purchased a
particular property.
For our purposes, we
are going to say that
value is the present
value of the projected
future income stream
or benefits that you
expect to obtain.
www.GabhartInvestments.com
5. Value of Property, cont’d
Income properties produce income that provides a
stream of cash sufficient to:
• Cash flow not only covers all expenses, but reduces the debt
necessary to acquire the property; and
• Give you a return of your investment plus a return on your
investment.
• Even if the investor chooses to use the property themselves
and pay the necessary operating expenses, taxes and
maintenance themselves, the value of the property is what it
would have cost them to obtain a comparable property as an
investor.
www.GabhartInvestments.com
6. Value of Property, cont’d
Cash Flow analysis for real estate investments follow a very specific
format:
Gross Scheduled Income
(Minus)
Vacancy and Collection Loss
(equals)
Effective Gross Income
(minus)
Operating Expenses
(equals)
Net Operating Income
The format above does not change, regardless of the type of property.
Therefore, it is important that the practitioner be familiar with the
formula, as well as the definition of each.
www.GabhartInvestments.com
7. Gross Scheduled Income: The sum of the
expected rent for a particular property. e.g. In
an Apartment building it would be the sum of
the rents from each apartment.
Vacancy: Is calculated as the rent loss due to
empty units. When underwriting the lenders
usually use 5% or the market vacancy factor.
www.GabhartInvestments.com
8. Effective Gross Income:
Is the difference between the GSI and Vacancy Factor
e.g. If Gross Scheduled Income is $100,000 and vacancy is
5% what is the Effective Gross Income?
GSI $100,000.00
Vacancy $ 5,000.00
EGI $ 95,000.00
www.GabhartInvestments.com
10. Net Operating Income
GSI $ 100,000.00
Vacancy $ 5,000.00
EGI $ 95,000.00
Expenses
Taxes $ 15,000.00
Utilities $ 3,450.00
Management $ 5,000.00
Maintenance $ 5,000.00
Insurance $ 5,000.00
Total Expenses $ 33,450.00
Net Operating Income $ 61,550.00
www.GabhartInvestments.com
11. Pricing Summary
Calculating the Comparable Benchmarks
CAP
GRM
CPU
Cost per Square Foot
www.GabhartInvestments.com
12. Capitalization Rate
– The methodology using Capitalization (CAP) rates to derive value
is known as Direct Capitalization. Symbolically,
CAP = NOI / Price
– For example, if within a specific submarket properties have
recently traded at a 10% CAP rate and a property has an NOI of
$150,000, you can derive a preliminary value estimate of
$1,500,000 by dividing $150,000 by 0.10.
www.GabhartInvestments.com
13. Capitalization Rate Cont’d
• If the NOI were $100,000 what is the property
worth at a 6% CAP? 7% CAP? 8% CAP?
• $100,000 / 6% = $1,666,667
• $100,000 / 7% = $1,428,571
• $100,000 / 8% = $1,250,000
www.GabhartInvestments.com
14. Capitalization Rate, cont’d
• A warning about CAP Rate:
• Be careful with the term "CAP Rate". Advertised rates will
vary depending upon the method of calculation. For
example, CAPs can be based on:
– Actual income and expenses from the prior 12 months,
– Projected income and last year's expenses,
– Projected income and last year's expenses inflated by 3.0%,
– Current income and projected expenses,
– Projected income and expenses,
– And for each of these, NOI can be calculated before
or after reserves.
– Click here for more in depth information on CAP
RATES
www.GabhartInvestments.com
15. Gross Rent Multiplier
Another method of valuing an income steam is known as the gross
rent multiplier (GRM).
– Sometimes it is also referred to as the gross income
multiplier (GIM).
This method simply compares the value or sale price of a property
to its gross rental income.
The gross income that is used will always be gross income, but it
may be figured on an annual or a monthly basis.
In most cases, the monthly gross rents will be used in small
residential properties almost exclusively.
www.GabhartInvestments.com
16. Gross Rent Multiplier, cont’d
Regardless of which type of gross income is used, the calculation
is the same.
– The formula is: Value = Gross x GRM
This factor must be derived from analysis of comparable property
sales.
– For example, in analyzing a small residential
investment property with a gross annual income of
$12,500. a search of comparable sales indicates the
following data;
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17. Gross Rent Multiplier, cont’d
The gross rent multiplier for each property may now be
calculated
Value Gross Income GRM
Sale 1 $125,000 $19,600 6.38
Sale 2 $164,000 $26,100 6.28
Sale 3 $110,000 $17,100 6.43
Sale 4 $130,000 $20,000 6.5
Sale 5 $182,000 $30,000 6.07
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18. Cost Per Unit
Cost per Unit is a simple market benchmark, derived by
dividing the price by the number of units. Conversely, you
derive the price by multiplying the number of units in a
building by the current market price per unit.
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19. Cost Per Unit Cont’d
Value Units CPU
$1,000,000 8 $125,000
$1,000,000 10 $100,000
$1,000,000 12 $83,333
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20. Price Per Square Foot
The price per square foot is derived by
dividing the price of the property by the
square footage.
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21. Price Per Square Foot, cont’d
Value S.F. PPSF
$1,000,000 3,300 $303.00
$1,000,000 10,000 $100.00
$1,000,000 2,000 $500.00
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22. Weaknesses of the Indicators
The price per unit does not consider the size, type of units, income or
physical condition.
The price per sq. ft. does not consider the number of units, the type of
units, the income or physical condition.
Gross Rent Multiplier considers only the Gross Potential Rent (GPR),
not the vacancy, expenses, physical condition or the potential upside
due to below-market rents.
The CAP Rate considers the net income but not the impact of the
financing or the potential upside due to below-market rents.
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23. Leverage, cont’d
The principal of using
leverage to your
advantage can be
illustrated fairly simply.
– If you were to invest
$100,000 and receive
a return of $10,000,
then you would have
received a 10% rate
of return ($10,000
return divided by
$100,000 initial
investment).
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24. Leverage, cont’d
What if, on the other hand, you were to make the same $100,000
investment, at the same return, using only $10,000 of your own
money while borrowing the balance required from somebody else?
The return on your investment (not counting interest on the loan)
would be 100% ($10,000 return divided by $10,000 initial
investment).
This is a simplified example but shows the dramatic effect
leverage can have on total return.
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25. Loan to Value (LTV)
• The maximum loan amount a lender is willing to lend
expressed as a percentage of the value.
• e. g.75% LTV means the maximum amount a lender
will loan is 75% of the value (or purchase price).
• If the purchase price is $2,500,000 and the max LTV
is 65% what is the maximum Loan Amount?
• $2,500,000 * 65% = $1,625,000
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26. Debt Service Coverage Ratio (DSCR)
• DSCR is a ratio used by the lender to provide
an income “cushion” to limit loan amount.
• The larger the DSCR the greater the perceived
risk by the lender
• If you are told the DSCR is 1.30:1.00, what
does this mean?
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27. Debt Service Coverage Ratio (DSCR) cont’d
• The Net Operating Income must be 130% or
1.3 times greater than the annual debt service
payments.
• e.g. If the annual debt service were $100,000
and DSCR were 1.30 to 1.00 what is the NOI?
• $130,000
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28. Debt Service Coverage Ratio (DSCR) cont’d
• What about the other way? If my NOI is
$100,000 and DSCR is 1.30:1.00 how much do
I have for debt?
• $100,000 / 1.30 = $76,923
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29. Debt Service Coverage Ratio (DSCR) cont’d
• $100,000 / 1.30 = $76,923
• If the rate is 5% and the amortization is 25
years, how much can I borrow?
• $76,923 / 12 = $6,410 = monthly payment
• Solve for Present Value = $1,096,495
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30. Debt Service Coverage Ratio (DSCR) cont’d
• Purchase price is $1,000,000, NOI is
$65,000, maximum LTV is 75%, interest rate
is 6%, amortization is 25 years, and the
DSCR is 1.25 to 1.00, how much can be
borrowed?
1. $65,000/1.25 = $52,000
2. $52,000 / 12 = $4333
3. Solve for PV = $672,511 or 67% LTV
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31. Cash on Cash Return
• Some may refer to this as Return on
Investment or ROI
• ROI = Cash flow after debt service/Investment
• Let’s use the previous example to determine
investment amount ($1,000,000 with max LTV
of 67% = $330,000 investment.
• What is the ROI or Cash on Cash if there is no
debt?
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32. Cash on Cash Return cont’d
• NOI = $65,000
• Annual Debt Service = $52,000
• Investment = $330,000
• ROI = ($65,000 - $52,000)/$330,000 or 3.94%
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33. Review
• If the NOI is $150,000, the expenses are 35% of EGI,
and the vacancy factor is 7% what is
• A) The Effective Gross Income?
• B) The Gross Scheduled Income?
• C) If the CAP is 8% what is the purchase price?
• D) What is the GRM given the 8% CAP?
• E) Assume a 1.30 to 1.00 DSCR, a rate of 5%, 30
year amortization, and a maximum LTV of 75%,
what is the maximum loan amount?
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34. Review Cont’d
• A) EGI = $150,000 / 65% = $230,768
• B) GSI = $230,769 / 95% = $242,914
• C) $150,000 / 8% = $1,875,000
• D) GRM = $1,875,000/$242,914 = 7.72
• E) 150,000/1.3 = $115,385
$115,385/12 = $9615
Solve for PV = $1,791,078 =95% LTV
Max LTV is 75% or $1,406,250
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