The term sheet is an important document in commercial real estate lending. It is used to outline the terms of a potential loan prior to fully underwriting the deal and issuing a commitment letter. In this article, we will take a closer look at how terms sheets work for commercial real estate loans. To provide …
As sure as the sun rises, interest rates are going to go up and down over time. As they change, they have a profound effect on global financial markets, investors, banks, and corporate borrowers. In the world of lending, both borrowers and debt issuers (lenders) have the ability to capitalize on interest rate movements by …
Business owners have many options to consider when searching for the funds needed to finance a capital investment. From traditional bank lenders to fintech startups, the options are plentiful and the purpose of this article is to highlight a lesser known, but widely used source of financing, the SBA504 loan. To get you up to …
As a participant in the real estate market, have you ever come across an attractive deal, but you didn’t have the liquidity needed to secure it? Perhaps you were waiting on another sale to close in order to fund the needed equity for the new deal? The above scenario happens so often that there’s a …
Residual techniques in commercial real estate valuation are sometimes used to value a property, but these residual techniques are also often misunderstood. The income capitalization approach to valuation utilizes a cap rate that represents the value created by all of the real property. It incorporates the capitalization of income from both the underlying land and …
The sales comparison approach is a popular and common valuation methodology for real estate. Yet, there are many nuances to the sales comparison approach for commercial real estate that are misunderstood. The sales comparison approach can be particularly helpful when a property does not generate lease income, or that information is not available. In this …
The income approach is one of three techniques commercial real estate appraisers use to value real estate. Compared to the other two techniques (the sales comparison approach and the cost approach), the income approach is more complicated, and therefore it is often confusing for many commercial real estate professionals. In this article, we’ll walk through …
Appraisers use three different methods to estimate the value of a property. The income approach considers the value as the present value of future expected cash flows generated by the property. It is most accurate when valuing commercial properties with rental income in active markets. The sales comparison method relates the estimated value of the …
The concept of highest and best use is one of the fundamental principles that underlie real estate appraisal. Highest and best use requires that the appraisal considers not just the current use of the property but also the potential value associated with alternative uses. The Appraisal Institute has four tests that appraisers can use in …
The cap rate is an important concept in commercial real estate, and it is widely used. There is often confusion about how to calculate the cap rate using various methods. The purpose of this article is to demonstrate several ways to calculate the cap rate. How to Calculate the Cap Rate Ratio Perhaps the simplest …