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 …
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 …
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 …
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 …
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 …
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 …
The internal rate of return (IRR) is among the most common metrics used to evaluate performance in finance, private equity, and commercial real estate. It’s one of several key outputs of a discounted cash flow (DCF) analysis. Despite its widespread use, IRR is often misunderstood or misinterpreted. In this article, you’ll learn precisely what IRR …
The breakeven occupancy ratio is one of the less frequently discussed 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 commercial real estate loans. By calculating the percentage of a property that needs to be leased to cover all …
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 …
Value is traditionally defined as the power of a good to command other goods or services when exchanged. Within this broad definition of value, there are various types of value given to real property, such as investment value, market value, insurable value, assessed value, liquidation value, or replacement value. In this article, we’ll go over …