What Makes a Good Commercial Real Estate Location?
Although the saying is cliche, it tends to be true, the three most important aspects of a commercial property are: location, location, and location. The same property in a good location could prove to be substantially more successful than if it was located in a less desirable area. But, what separates a good location from […]
Commercial Real Estate Market Analysis Basics
It is common for commercial real estate(CRE) investors to spend a significant amount of their pre-purchase due diligence time analyzing a property’s potential rental income and operating expenses to determine what net cash flows could ultimately be received. This information provides important input into the ultimate buy/don’t buy decision, but it isn’t the only information […]
What Commercial Real Estate Investors Need to Know About The Cash on Cash Return
There are many different metrics that can be used to measure a commercial property’s return. For example, the Internal Rate of Return (IRR) is used to measure a property’s compound annual return, the capitalization rate or “Cap Rate” is used to measure the annual return assuming an all cash purchase, or Net Operating Income can […]
What You Should Know About Commercial Real Estate Ground Leases
It is a common assumption that a commercial real estate investment (CRE) always involves the fee simple purchase of an asset. While this is a very popular option, it isn’t always the case. In some instances, a property owner may elect to enter into a long term “ground lease” with a real estate investor instead […]
What You Should Know About the Commercial Real Estate Operating Expense Ratio
Commercial real estate investors with high levels of deal flow face a unique challenge. They need to have a way to filter through large volumes of financial information quickly to identify the properties with the best chance for delivering a strong return. In doing so, they can concentrate their detailed underwriting efforts on these assets […]
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, […]
Equity Multiple in Commercial Real Estate Explained
One of the tricky parts about measuring the potential profitability in a commercial real estate investment is that there are several ways to do it, and each metric has its own quirks, benefits, and drawbacks. For this reason, investors rarely look at one metric alone, instead choosing to look at a suite of them to […]
Financing the Deal: Why the Debt Service Coverage Ratio Matters
A typical commercial real estate lender receives dozens of new loan requests each month. As such, it is necessary to have a mechanism to filter through the deals to identify which ones have the best chance of being repaid. One of the ways that lenders do this is through the use of a metric called […]
