A "Number Cruncher," can be an accountant or person who works with a large number of arithmetic operations or even a person who works with large amounts of data which requires calculation for forecasting, and analysis.
If you relate the above to Real Estate investments then you know the purpose of this Blog. The Blogger, Timothy Michael Eovino, CPA, CCIM is a number cruncher, who makes his living in the field of Commercial Real Estate.
This Blog will show you the many ways to crunch Real Estate numbers and how they can help you with your analysis for purchase. You may be an investor, owner, or potential owner looking to crunch some numbers to satisfy your curiosity or comfort level.
Each topic will be both for general knowledge as well as practical use if applied correctly to your numbers. I always suggest the use of a professional, when planning an investment in Real Estate. Since I no longer practice public accounting, I suggest a local practicing CPA or Real Estate Lawyer to assist you. If you are looking for a Commercial Real Estate Agent in Southwest Florida, then I can help you with that. My hope is that you find something useful , in this Blog, that makes you think, or stirs your interest in learning more.
The first term to learn is Square Feet. SqFt. Most all properties will be measured in SqFt. A vacant lot might be 125 feet wide and 105 feet deep. 125' X 105' = 13,125 sqft. An acre is 43,560 sqft. So your vacant lot 13,125 SqFt. / 43,560 SqFt. = .3 of an acre (rounded) An office a retail space or an industrial warehouse will be measured the same way.
In the coming Blogs you will learn about CAP Rates, learn how to calculate them, interpret them and use them to your advantage. Terms like "Gross Rent Multiplier", "Debt coverage Ratio", Cash Flow Before & After Tax", "Cash on Cash Return" Total Yield", and Return on Equity are things I will cover for you. These are some of the terms we use in Commercial Real Estate. If you are a buyer, seller or investor, then you need to know your way around them. Follow this blog and you will.
Starting here, with some basic knowledge, first. There are four property type categories of Commercial Real Estate, which you should know. If you want to invest in this market you need to know what to ask for. Office, Retail, Multi-family and Industrial.
Office properties are used by practically everyone in business. Even in a warehouse, there is generally an office space. Office properties are classified in A, B or C. If you want walnut paneling and a highrise location, then you will pay a premium for such class A space. But if you want a place to keep your parts and bill your customers, then B or C will work just fine.
Retail is for selling goods and services to customers. Multifamily can be any type of apartments from duplexes to highrise buildings. Industrial properties are for production, manufacturing and warehousing.
If you are not going to use your property yourself, then you need tenants. No matter what type of property you buy, you will want tenants. The ideal is to be fully rented all the time, but that is not always the case. When investing in a property or selling it, you will want to know the 'Vacancy Rate.'
Vacant Space, divided by total space is the vacancy rate.
Sample: 7,000 square feet Vacant, divided by 100,000 sq ft Total = 7% Vacancy rate. Pretty simple stuff.
Now let's crunch it a bit. If you know how many square feet, how much you plan to charge per SqFt., and you can predict your vacancy rate, then, you can predict your Effective Rental Income (ERI). Potential Rental Income (PRI) - vacancy and credit losses, equals ERI. 100,000 sqft X $15 per SqFt = Potential Rental Income time vacancy rate 7%. Now subtract them. 100,000 X $15 = $1,500,000 X 7% = $105,000. $1,500,000(PRI) - $105,000 Vacancy = $1,395,000. ERI
Next time more crunching - NOI Net Operating Income.
Friday, April 30, 2010
Subscribe to:
Posts (Atom)