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. What is Gross Rent Multiplier (GRM) The gross rent multiplier, often abbreviated as GRM in real …
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 …
Retail tenants and commercial real estate professionals should be aware of a common provision in leases known as percentage rent. This article will explain how percentage rent and breakpoints work, with clear examples along the way. Simply put, percentage rent is extra rent paid based on a percentage of gross sales. Percentage rent situations can be …
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, …
One of the first steps in evaluating a commercial property is determining the total rentable square feet. While this might seem like a straightforward calculation, it unfortunately doesn’t always end up being so simple. This is particularly true for multi-tenant buildings. In this article we’ll go over how to calculate rentable square feet (RSF), usable …
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 …
If you are underwriting a financed commercial property, the cash-on-cash return answers a simple question: How much annual cash flow am I getting for the cash I have invested in the deal? Suppose you invest $1,000,000 of equity in a property and expect to receive $80,000 of cash flow before taxes during the first year. …
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 …