5 Excel Formulas for Real Estate Investment Analysis
Fundamentally, private commercial real estate analysis seeks to compare the cost of an asset to the cash flow that it produces. While the concept is relatively simple, the real estate analysis itself can be much more complicated in practice. There are numerous variables to consider, and an abundance of complex math to perform. For this […]
What is Tenant Concentration Risk?
Many commercial real estate shopping centers have a similar configuration. Typically, they have an “anchor” tenant who leases the majority of the total space in the property. And in many cases, these tend to be a large, recognizable company whose goods or services attract traffic to the center. As such, the anchor tenant is usually […]
Understanding the Three Ways that Commercial Real Estate (CRE) Lenders Calculate Interest Due
One of the major benefits of commercial real estate investment is the wide availability of commercial mortgage loans at relatively favorable terms. As a result, individual real estate investors can minimize the amount of money that they must invest in a transaction, which boosts the return on the cash they receive. However, every commercial real […]
Why it Can Make Sense to Invest in a Zero Cash Flow Property
Much of the conventional thought used to evaluate a potential commercial real estate investment focuses on the amount of cash flow that a property produces. The greater the cash flow, the higher the value. Because this concept is so fundamental to CRE analysis, it may come as a surprise that there are certain circumstances where […]
What is Yield on Cost in Commercial Real Estate?
One of the most fundamental concepts in commercial real estate (CRE) investment is understanding the relationship between risk and return. The more risk a commercial property carries, the greater the potential reward. However, risk can be tricky to quantify because it is all relative. Each investment and each CRE property type carry their own levels […]
Fixed Costs vs. Variable Costs in Commercial Real Estate
When evaluating the potential purchase of a commercial real estate asset, one of the most important tools is the financial model that is constructed to estimate potential returns. Broadly, these financial models have three main components: income, expenses, and debt service. For the purposes of this article, the focus is on income and expenses. A […]
Levered vs. Unlevered Cash Flow in Real Estate
Fundamentally, the value of a commercial real estate asset is derived from the amount of cash flow that the property produces. When evaluating potential returns for a real estate investment, investors may often have to consider levered vs. unlevered cash flows. In this article, FNRP explains the difference between levered and unlevered cash flow in […]
Using the Income Approach to Value Commercial Real Estate
Broadly, there are three methodologies used to value a commercial real estate asset: the cost approach, the sales comparison approach, and the income approach. Each has its own strengths and weaknesses. The purpose of this article is to describe the income approach in detail so that you, a potential investor, can quickly use it to […]
Lease-Up vs. Stabilization CRE Ownership Periods
The core idea behind a value-add investment is to acquire a property at a discount to its replacement cost, and then to improve it. Often, these improvements can take the form of major renovations or enhancements that render some or all of the leasable space uninhabitable for a period of time. Once the renovations are […]
