Where to Look For the Risk in a CRE Transaction
It’s a given that every commercial real estate transaction involves some level of risk. In addition, there is a direct correlation between the level of risk involved and the variance in potential returns. A low risk investment—such as a credit tenant triple net leased property—typically provides low but stable returns, whereas a higher risk investment—such […]
Why Regulatory Risk Shouldn’t Be Overlooked in Commercial Real Estate
It is a given that a commercial real estate (CRE) investment contains risk. Prior to committing capital to a property, it is a best practice for investors to spend a significant amount of time understanding where the risk lies in the transaction and how it can be minimized. Traditionally, much of this effort tends to […]
What is the Gross Rent Multiplier?
Prior to committing capital to a commercial real estate investment, a rational investor seeks to understand the relationship between the investment’s risk and the potential return for taking it. To ensure that all angles are covered when evaluating a potential return, there are a variety of metrics that are used by commercial real estate investors, […]
What Types of Insurance Does a Commercial Real Estate Property Require?
Whether it is a 300 unit multifamily apartment complex, large industrial warehouse, high rise office building, or popular retail center, commercial properties tend to be a hive of activity. They are places where people gather and where business is conducted, which also means they are likely places where things happen. These things – whether they […]
Interest Rate Swaps: Explaining the Basics
One of the major benefits of commercial real estate investment is that debt is widely available at generally favorable terms. One term specifically, the debt’s interest rate, is a critical component in an investment’s return calculation. But, the thing about interest rates is that they are always changing, as the market fluctuates, so do loan […]
What is a Cap Rate in Commercial Real Estate?
There is a common saying in real estate investing circles that states “something is only worth what someone is willing to pay for it.” One of the most common ways real estate investors determine what a property is worth is by using a multi-purpose metric known as the Capitalization Rate or “cap rate” for short. […]
The Top 7 Commercial Real Estate Commandments
One of the major benefits of commercial real estate investing is that it is a tried and true method of portfolio diversification, generating cash flow, creating wealth and putting those who own it on the path to financial freedom. This means that there are no secrets to the business plan. First time and seasoned real […]
Cap Rates in Commercial Real Estate: Formula & Explanation
When considering the purchase of a commercial real estate asset, all investors will use a property’s existing cash flows to create a “proforma” financial projection of future cash flows. The proforma, which includes allocations for income and expenses, serves as the basis for calculating the property’s potential return on investment. A diligent real estate investor […]