cap rate: The Secret to Pricing Commercial Real Estate
- 01/22/11 12:59 PM
Pricing is often a touchy subject for sellers of commercial real estate. Often a seller will want to price their property based on what they owe, what they paid, or what they'd like to get. Unfortunately, these three numbers don't usually have much to do with what the market will bear. Pricing a property in line with the market is the best way to attract several potential buyers. More buyers means more chances to get the best possible price for a property. So how do we figure out what the market price should be? There are 3 typical ways to value a property … (0 comments)
cap rate: Evaluating Commercial Real Estate Investments - Calculating Cap Rates
- 12/23/10 09:02 AM
Hopefully you have a good handle on calculating NOI after my last post. Now that you know what NOI your small retail property in Reading, PA is generating, you can begin to figure out what this property is worth to you. One of the most common techniques for determining value is call income capitalization. This technique uses a capitalization rate (cap rate) translate your NOI into a value. The basic formula is:
I want to point out that although cap rates are usually expressed in whole numbers, they are actually decimals. For example, if … (0 comments)
cap rate: Evaluating Commercial Real Estate Investments - Calculating NOI
- 12/22/10 12:30 PM
In my previous blog post I promised to explain some of the basic calculations necessary for investing in commercial real estate. I'll start today with what I believe is the beginning, Net Operating Income (NOI). I will present a simplified version of this calculation today, and will get into more details in a future post. So, let's assume we are thinking about purchasing a small retail property in reading, PA. One of the first things that we ask the seller for is his financials or P&L's. Often when we ask for this, we get some numbers scratched on a piece of paper, or a bunch of bank … (0 comments)
cap rate: 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)
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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Pricing is often a touchy subject for sellers of commercial real estate. Often a seller will want to price their property based on what they owe, what they paid, or what they'd like to get. Unfortunately, these three numbers don't usually have much to do with what the market will bear. Pricing a property in line with the market is the best way to attract several potential buyers. More buyers means more chances to get the best possible price for a property. So how do we figure out what the market price should be?
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