Real Estate Returns:  Cap Rate vs. Return on Cost

Every real estate investor has their own set of return requirements that help determine whether or not a project is worth pursuing.  To measure potential returns, there are two widely used methods:  Capitalization (or “cap”) Rate and Return on Cost.  They each have their own strengths and weaknesses and both are useful in the appropriate situations. [...]

Non-Recourse Financing

When most real estate investors are getting started, they don’t have “hard money” for the investment. But even though you don’t have money in the bank to pay cash up front for the investment, there are often financing options that can be leveraged. If you are looking for a loan for an investment opportunity, consider non-recourse [...]

What Is Debt Service Coverage Ratio (DSCR)

When analyzing leveraged commercail real estate (properties you acquire using debt) assets, one of the most important metrics to look at it something known as Debt Service Coverage Ratio. Debt Service Coverage Ratio (DSCR) is a ratio that tells you how much debt you need to service, compared to how much net operating income you are [...]

Are the Numbers Real

When you're making an offer on a property, you're usually working off of numbers provided by the seller and/or seller's broker. Doesn't this seem a little strange? A party with the complete opposite interest of yours is providing you with ALL of the data that you will base your potential offer to purchase on. I'm not [...]

Giving a Break for Term

One of the most crucial valuation components to a piece of commercial real estate is the term left on the current tenancy's leases. It's a simple equation: Longer Terms = Higher Valuation While keeping a properties net operating income (NOI) as high as possible is also a major contributor to the valuation of a property, sometimes [...]

Creating Accurate Financial Models

When we know that we have a good chance of acquiring an asset, one of the first things we like to do is put together an accurate financial model on the property. These models give us a good idea of what kind of cash flow and value we can project from a particular asset over a [...]