Robert Schmidt

How to Use the Operating Expense Ratio

The operating expense ratio provides a lot of useful insight into a commercial property analysis, but it’s not as widely used as it ought to be. The operating expense ratio is a simple ratio that’s easy to calculate and in this article we’ll take a closer look at how to calculate the operating expense ratio, …

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What is a Tenant Estoppel and How Does It Work?

In commercial real estate the tenant estoppel often comes up during the due diligence phase of an acquisition or during the underwriting of a loan. What exactly is a tenant estoppel and how does it work? Let’s dive in and take a closer look at the tenant estoppel. What is a Tenant Estoppel? What exactly is …

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How to Use the Effective Annual Rate

Typically an interest rate is given as a nominal, or stated, annual rate of interest. But when compounding occurs more than once per year, the rate of interest actually realized will be higher than the nominal rate of interest. This actual, realized rate is known as the Effective Annual Rate (EAR). In this article we’ll …

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How Not to Use NPV in Excel

NPV in Excel is widely used but commonly misunderstood. Even top MBA grads commonly misuse NPV in Excel. In this short article we’ll look at the problem with NPV in Excel, show you where most people go wrong, and we’ll also walk through the correct way to use the NPV function in Excel, step-by-step. The Problem With NPV in …

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Ground Lease Fundamentals in Commercial Real Estate

Ground leases are an important component of many commercial real estate deal structures. Yet for a lot commercial real estate professionals ground leases are rarely encountered and are poorly understood. In this article we’ll shed some light on how ground leases work, explain what typical ground lease structures look like, and we’ll also clear up some …

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Understanding Replacement Reserves in Commercial Real Estate

The topic of replacement reserves is often confusing for commercial real estate professionals. How much should be set aside for replacement reserves? Should replacement reserves be included in net operating income? How do replacement reserves impact cap rates and value? In this article we’re going to take a closer look at reserves for replacement, clear …

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Time Value of Money: A Beginner’s Guide

Being completely comfortable with the time value of money is critical when working in the field of finance and commercial real estate. The time value of money is impossible to ignore when dealing with loans, investment analysis, capital budgeting, and many other financial decisions. It’s a fundamental building block that the entire field of finance …

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Internal Rate of Return (IRR): What You Should Know

The internal rate of return (IRR) is a widely used investment performance measure in finance, private equity, and commercial real estate. Yet it’s also widely misunderstood. In this article you’ll learn: What is IRR The IRR formula How to calculate IRR How to calculate IRR in Excel IRR meaning IRR vs CAGR What is a …

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How The Breakeven Occupancy Ratio Works

The breakeven occupancy ratio is one of the less frequently used ratios in commercial real estate, yet it’s also one of the most practical and useful ratios to know. It’s also especially important to lenders when underwriting investment commercial real estate loans. In this short article we discuss how the breakeven occupancy ratio works, why it’s …

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Apartment Investing Case Study

In this article we are going to conduct an investment analysis on a 140 unit apartment building acquisition. We’ll walk through the process of forecasting cash flows and also explain the calculations needed to determine investment value. Read on as we take a deep dive into the world of apartment investing. Apartment Investment Case Study …

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