All Topics / Overseas Deals / Calculating Value of Investment Property

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  • Profile photo of CheevesFinancialCheevesFinancial
    Participant
    @cheevesfinancial
    Join Date: 2010
    Post Count: 201

    There are several ways to calculate Cash Flow, Rate of Return, and Cap Rate.  In Commercial real estate, we look at different factors such as Internal Rate of Return, Discount Cash Flow models, and other stuff that calculates the profitability of investments.  Most pitch real estate on a Cap Rate.  I use Cap Rates all the time, but it's not the sole decisive computation for me or my clients.  There is way more involved.

    When looking at investment property on a commercial level, I like to draw out a running 10 year plan and I use estimates for inflation, vacancy, recurring or increasing operating expenses, and increases to rental rates.  I'd like to think that if I buy a stable asset now at 8% Cap Rate, I can achieve double digits by the time a few years rolls around.  Adding value can be done in many areas of real estate.

    If you like investing in multi-family property, I suggest you get a small book from the bookstore that will discuss Net Present Value, Internal Rate of Return, etc.. You will not only know how to make smarter decisions but you'll feel more intelligent :-)

    The following link will bring you to a google doc that will show how we calculate values.  Sorry if the spreadsheet seems crammed but I'll try to make some adjustments to it, but for now you get the picture. 

    VALUE CALCULATION

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
    http://www.CommercialRealEstateVoice.com
    Email Me | Phone Me

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
    Participant
    @zmagen
    Join Date: 2012
    Post Count: 523

    Can't open the file – sounds interesting, would love to have a peek and check out the differences/similarities to our own sheets.

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
    http://www.nippontradings.com
    Email Me | Phone Me

    Ziv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property

    Profile photo of CheevesFinancialCheevesFinancial
    Participant
    @cheevesfinancial
    Join Date: 2010
    Post Count: 201

    Hi Ziv,

    If you send me a PM with your e-mail, I will gladly send it to you.  I sent it to Freckle to upload since I'm bad with Google Docs.  Thanks

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
    http://www.CommercialRealEstateVoice.com
    Email Me | Phone Me

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,680

    Use this link Ziv

    https://docs.google.com/spreadsheet/ccc?key=0Ag10nVvomrvSdERRMmVqTEZfMzdqWHZkMU42UENMLWc&usp=sharing

    Go to Filedownload as.. to download a file version that suits your system or play with it in Google Docs

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
    Participant
    @zmagen
    Join Date: 2012
    Post Count: 523

    Good stuff, thank you. :)

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
    http://www.nippontradings.com
    Email Me | Phone Me

    Ziv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property

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