HOW DO I DETERMINE THE VALUE OF COMMERCIAL REAL ESTATE? HERE IS HOW...

By
Mortgage and Lending with America One Mortgage Advisors CA DRE #02062657

Commercial Real Estate has Financial Indicators that are generally used in determining the value of Real Estate… “What Is It Worth”

Financial Indicators:

SUMMARY OF CALCULATIONS 

Price Per SqFt: Price ÷ SqFt 

Price Per Apartment Unit: Price ÷ # of Units 

Gross Rent Multiplier: Price ÷ Gross Potential Income (GPI) 

Vacancy Per Apt. Unit: GPI X % Vacant 

Economic Vacancy: Actual $ Value of Vacancy ÷ GPI 

Expenses Per SqFt: Total Expense ÷ Total SqFt 

Expenses Per Unit: Total Expense ÷ Total # of Units 

Expenses As % of GPI: Total Expense ÷ GPI 

Cap Rate: NOI ÷ Price 

Cash On Cash Return: Cash Flow ÷ Cash Invested 

GEI Return: GEI ÷ Cash Invested 

Loan To Value Ratio: Loan ÷ Price 

Taxable Income: GEI - Depreciation 

Theses indicators are based on income and expenses here is a easy to use worksheet:

(every property experiences income & expenses) 

 

Gross Potential Income (GPI) $____________________________ 

Plus Other Income + $____________________________ 

Less Vacancy or Credit Allowance ( % ) - $____________________________ 

Gross Operating Income (GOI) = $____________________________ 

Less Expenses - $____________________________ 

Net Operating Income (NOI) = $____________________________ 

Less Debt Service - $____________________________ 

Cash Flow Spendable = $____________________________ 

Plus Loan Principal Payments +$____________________________ 

Gross Equity Income (GEI) = $____________________________ 

Less Depreciation - $____________________________ 

Taxable Income = $____________________________ 

 

Example of Land Analysis 

Gross Potential Income (GPI) $ 0 (No Land Sale) 

Vacancy 0% (100% Vacant) 

Other Income $ 0 (No Income From Lease, etc.) 

Gross Operating Income (GOI) $ 0 

Expenses Taxes, Insurance Management, etc. 

Less net Income - $____________________________ 

Less Debt Service - $____________________________ 

Less Cash Flow - $____________________________ 

Plus Principal Payments + $____________________________ 

Gross Equity Income (GEI) +/- $____________________________ 

Depreciation $ 0 (Land Not Depreciated) 

Taxable Income +/- $_________________

Posted by

Christopher Shearer is a multi-family / commercial real estate consultant achieving property owners the highest possible NOI through the implementation of optimal rents for the property, accomplished through careful market, property, comparison grid analysis, effective cost control and revenue improvement programs; identify and analyze trends and recommending appropriate strategies to increase a properties maximum efficiency. Expert at Preparing new investment analysis presentations, offering memoranda and marketing materials, including key investment metrics. IRR, COC, DCR, CR etc.

A seasoned professional, with over 15 years' experience in real estate and finance management. A real estate broker licensed in Florida and Virginia specializing in real estate and asset management of multi-family and commercial properties. Christopher is currently pursuing his M.B.A. in real estate, he holds a B.A. in business as well as an A.A. in business management. Christopher has the following state licenses; Virginia Real Estate Broker, Florida Real Estate Broker, Florida Mortgage Broker and Colorado Mortgage Broker.

Contact me for a consultation and analysis of your commercial or multi-family properties.

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