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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 upfront 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 financing [...]

Measuring Private Equity Real Estate Returns: IRR vs. Equity Multiple

In order to measure an investment’s return, it is necessary to use the right tools.  Yet, there are many variables that can complicate this task, exposing the deficiencies of each tool and causing them to either skew the results or to not tell the entire story. In commercial real estate investing, two of the most widely [...]

What Is Debt Service Coverage Ratio (DSCR)

When analyzing leveraged commercial real estate (properties you acquire using debt) assets, one of the most important metrics to look at is something known as the Debt-Service Coverage Ratio. The Debt-Service Coverage Ratio (DSCR) is a ratio that compares your net operating income to your debt obligations. Typically the higher the ratio, the lower the risk, [...]

Understanding the Capital Stack of a Real Estate Investment

At the risk of going too-far back to basics, here is some Business 101: to operate, businesses need capital. When starting up, expanding, or purchasing significant assets, they raise that capital from investors. The terms on which investors commit capital reflect the degree of risk investors are willing to bear, and conversely, the returns the investors [...]

Evaluating Private Real Estate Investment Opportunities

When considering any type of investment, it’s a best practice to perform a significant amount of due diligence before deploying your hard earned money into it.  Depending on the opportunity, this can be tough because the evaluation metrics for each asset class are different and it’d be incredibly time consuming to know all of them.  For [...]

Private Equity Real Estate Fees

The administration of a private equity real estate fund is a time intensive and, at times, laborious process.  It takes a highly dedicated team of skilled professionals to start a fund, file the legal documents, raise the capital, find properties, underwrite them, manage them, and oversee all of the accounting, tax, and reporting responsibilities. For investors [...]

An Introduction to Cap Rates in Commercial Real Estate

The Capitalization or “Cap” Rate is one of many tools that an investor uses to value a commercial real estate property.  The formula for calculating it is relatively simple, but the intuition behind it is much more complex. Calculating the Cap Rate The Cap Rate is calculated as the property’s projected year one Net Operating Income [...]

Private Equity Real Estate Fees: What You Should Know

Depending on the perspective, investment fees are a topic that can elicit mixed responses.  From the investor point of view, they can reduce overall returns.  From the manager’s perspective, they are necessary to support the administration of an investment.  Either way, they are an important topic to discuss. In our case, we run a company that [...]

How to Evaluate Commercial Real Estate Using Discounted Cash Flow Analysis

At the most fundamental level, a commercial real estate investment involves investing a sum of money today to purchase a stream of income in the future.  The concept itself is simple, but the hard part can be trying to determine how much to pay for that stream of income. One of the most widely used, and [...]

Private Equity Real Estate: Fund Fees vs. Individual Deal Fees

At First National Realty Partners, one of our mantras is that “we look at 1,000 deals and choose ONE.”  We believe that this is one of the keys to our success and it requires a talented team of multidisciplinary real estate professionals to do it.  Once identified, it takes another team of equally talented professionals to [...]

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. [...]

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 [...]