irr: Evaluating Commercial Real Estate Investments - Making Projections (Part 1)
- 01/07/11 12:37 PM
In my post about calculating IRR, I promised to come back to the subject of making projections. Like many other aspects of buying commercial real estate, making projections is more of an art than a science. A friend of mine who works at a private equity firm likes to say, "All financial projections have one thing in common; they are all wrong!" His point is that despite the complex math involved, all acquisition models involve some, and often several, guesses or assumptions about the future. Some of these guesses are conscious, and some are not. For instance, in my example of the small (0 comments)
irr: Evaluating Commercial Real Estate Investments - Calculating IRR
- 01/04/11 09:02 AM
You may have noticed that it's been a few days since my post on Cash on Cash Returns, and I haven't yet posted regarding Internal Rate of Return (IRR) as I had promised. To be honest, thinking about addressing IRR in a single post is a bit daunting. It is the most complex of the topics that I've addressed so far, and there is a lot of disagreement about the use of IRR. There are many investors who prefer to use Net Present Value (NPV) calculations in lieu of IRR, some investors who use both, and many who don't use either. (0 comments)
irr: Evaluating Commercial Real Estate Investments - Calculating Cash on Cash Returns
- 12/29/10 12:42 PM
I'm sure if you've read my earlier posts you may be wondering when this will all end, but today we are finally getting to the good stuff: Returns. Why are you investing in commercial properties in Reading, PA? I'm guessing it's because you'd like to make some money. One measure of how much money you'll make on your investment is Cash on Cash Returns, also know as the Equity Dividend Rate. Your Cash on Cash Return is a measure of how many dollars you receive on an annual basis for every dollar that you invested. Let's continue the example of our small retail property (1 comments)
irr: Evaluating Commercial Real Estate Investments - An Introduction
- 12/21/10 12:24 PM
Whether you're investing in a 4,000 SF retail building in Reading, PA or a 400,000 SF office tower in Center City Philadelphia, there are a few key concepts that you need to understand. These concepts are the basis for most, if not all commercial real estate analysis. The most basic of which, is that the value of commercial real estate is a function expected future income from the property. This one concept has led to the creation of several different calculations that every commercial real estate investor should know. You must be able to calculate your NOI, Cap Rate, DSCR, Cash-on-Cash Return, and IRR. Knowing (3 comments)
irr: Reading PA | Berks County | Commercial Real Estate Financing
- 12/20/10 01:48 PM
I was discussing commercial real estate financing with another agent this evening. This agent is very experienced in real estate in general, but she mostly works with residential real estate. I realized that many if not most real estate agents don't fully understand the difference between financing residential and commercial real estate. I'm sure that this is true of most residential real estate investors as well. Commercial mortgages do not fit into the neat little boxes that residential mortgages do. Figuring out the best way to finance a commercial real estate deal is just as much an art as it is a (0 comments)
Commercial Real Estate blog discussing investing, selling, and leasing retail, office, industrial, residential, mixed-use, hospitality, self storage, and other commercial real estate in the greater Reading, PA market.
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