Understanding Net Operating Income (NOI) is essential in commercial real estate. Without a firm grasp of net operating income, commonly referred to as just “NOI”, it’s impossible to fully understand investment real estate transactions. In this article, we’ll take a closer look at net operating income, discuss the components of NOI, and also clear up …
The broker price opinion (BPO), also known as a broker opinion of value (BOV), is a popular way of estimating the value of a property. Typical reasons for ordering a broker price opinion include estimating value prior to purchase or sale, understanding collateral value when securing a new loan or refinancing, estimating liquidation value, buying …
The gross rent multiplier is a simple measure of investment performance used in the commercial real estate industry. Understanding the gross rent multiplier is important when evaluating commercial real estate transactions, but it also comes with several built-in limitations. In this article, you’ll learn: What is Gross Rent Multiplier (GRM) The gross rent multiplier, often …
Understanding the basics of credit analysis is important when raising debt financing for commercial real estate projects. Credit analysis is one step in the credit approval process a bank goes through to evaluate a corporate borrower, but it also comes in handy when evaluating the financial strength of tenants, corporate guarantors, and other individual operating businesses. In this …
Understanding the commercial real estate loan underwriting process can give you an advantage when seeking debt financing for a commercial property. In this article, we’ll discuss how lenders underwrite commercial real estate loans, and how to determine the maximum loan amount for a property. We will also cover how underwriting changes for different loan types, …
It’s common in the commercial real estate industry to use leverage, which means acquiring a property with debt rather than paying all cash. Positive leverage occurs when debt increases an investor’s rate of return. Negative leverage occurs when debt decreases an investor’s rate of return. At a high level, these leverage concepts are easy to …
Understanding the cash on cash return in commercial real estate is important when you are evaluating investment real estate transactions. What is the cash on cash return, and how do you calculate it for a commercial property? What are the nuances and limitations of the cash on cash return? In this article, we’ll tackle these questions …
After winning a new listing, the first step in any CRE marketing plan is to build a commercial real estate marketing package. But if you go on Loopnet or pull up some random marketing email blasts, it’s amazing what some brokers try to get away with. Most commercial real estate marketing packages are really bad, especially …
The discount rate is one of the most frequently confused components of discounted cash flow analysis. What exactly is the discount rate, and how does it work? What discount rate should I use in my analysis? These are all important questions to ask, and this article will explain the answers in detail. Read on for …