Entry Cap Rate vs. Exit Cap Rate: Difference & Calculation
Commercial real estate investment returns come from two sources, income and capital appreciation. While income provides steady cash flow over the life of the investment, capital appreciation is where the big gains can be earned. During the pre-purchase due diligence phase of the transaction, it is the real estate investor’s job to estimate both the […]
Understanding the Differences Between Commercial Real Estate Loan Types
Commercial real estate is defined as investment property that is acquired with the intent to earn a return through cash flow, price appreciation, or both. The primary difference between a commercial investment property and a residential investment property is that commercial property tenants are businesses, not individuals (with the exception of multifamily). Because there are […]
Loan Term vs. Loan Amortization: What’s the Difference?
Nearly every commercial real estate transaction involves a loan, and commercial real estate mortgages can be far more complicated than their residential counterparts. In many cases, CRE mortgages offer additional options and nuances that are needed to meet the unique needs of a commercial real estate borrower. Several of these unique options have to do […]
Five Commercial Real Estate (CRE) Return Metrics Every Investor Should Know
When evaluating a potential property purchase, the number one question on every real estate investor’s mind is “if I buy this property, what is my potential return on investment?” There are many ways to measure this, each with its own advantages and disadvantages, and these important metrics are the subject of this article. In order […]
Net Present Value (NPV) vs. Internal Rate of Return (IRR)
Two commonly used commercial real estate metrics are the Net Present Value (NPV) and Internal Rate of Return (IRR). The calculation of these metrics has some overlap so it is critically important to understand the difference between them and how they contribute to the ultimate investment decision. What is the Net Present Value? NPV is […]
Understanding the Difference Between IRR and XIRR In Commercial Real Estate
When evaluating the performance of a commercial real estate investment, there are a number of metrics that are traditionally used to measure returns. One of the most common is called the internal rate of return. By definition, the Internal Rate of Return (IRR) is the discount rate that sets the Net Present Value of a […]
How to Estimate Commercial Real Estate Property Taxes
Property taxes are charges levied by state and local governments on real estate within their jurisdiction. Property taxes are calculated based on the value of the property, and they are collected on a regular basis, usually quarterly or annually. For commercial property owners and investors, real estate taxes are one of the largest operating expenses […]
Commercial Real Estate Due Diligence: 6 Types that Should be Performed for Every CRE Investment
Before deploying investor capital into a commercial real estate asset, we have a duty to ensure that the property is safe for occupancy, that its title can be cleanly transferred to us as the new owner, and that its finances meet our return requirements. To verify that these things are true, we invest a significant […]
Commercial vs Residential Property Valuation Techniques: What is the Difference?
There is an old adage that something is only worth what someone is willing to pay for it. In the real estate industry, this is only partially true. There is always a price that an investor is willing to pay, but it may or may not be close to the “fair market value” of the […]
