Good Investment or not? These 2 tables will help you decide.

Deciding to buy a commercial property starts with a first-cut look at some basic numbers including revenue, expenses and rent roll, all of which should be provided by the property owner’s agent. This is a crucial step in deciding if a deal is worth a deeper level of analysis. In that regard, as a buyer’s agent I prepare the following two tables to begin the conversation. They include:

For year one

  • Cap rate
  • Break even occupancy ratio
  • Cash-on-cash return

Over 5-year holding period

  • Rolling cap rate
  • Rolling cash-on-cash return
  • Rolling break even ratios

Importantly, whether or not these numbers reflect reality depends upon their accuracy. Indeed, there is no industry standard as to how an owner’s agent presents a property’s operating numbers. They can be included in a slick, highly detailed offering statement or written on the back of an envelope. In either case, they can be accurate or not so much. Your agent has to do some serious vetting, even at the pre-LOI stage of the process, in order for you to determine if a purchase is worth consideration.

If you are interested in investing in commercial real estate reach out to me either by phone/text (973-865-1863) or email (bmccabe362@gmail.com).


                                                                                                              

5 Years

 

 



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