All Forum Posts by: Barry Ruby

@Victor Kapustin

Victor,

In addition to Henry’s excellent advice, you need to establish the rental income the project can generate which will define it's ability to cover debt payments and provide a profitable cash return on equity.

Your analysis to date doesn't appear to take income into account.

@Jeni Famorca

Hi Jeni,

I built an Excel workbook for my son that runs analysis on a wholesale deal. Let me know if you are interested in receiving a copy and I'll send it your way.

@Erik W. That’s great advice Erik

@Ryan Arbeiter

Ryan, congratulations on your interest and and dedication to getting into real estate.

The most valuable thing you can do for yourself is to become highly skilled in understanding how the numbers work.

Please feel free to contact me if you have any questions about what this involves and how to do it.

@Antonio Bodley

Comparable sales data is a standard way to determine the value of a site. However, as a developer, doing a residual analysis is a much more pertinent measure of value.

A residual analysis involves establishing the value of the highest and best use of the land and deducting all project cost together with a target development profit and commissions and closing costs from the total value,

The “residual” number represents the amount that can be assigned to land value under the project planned to be built on it.

Let me know if you are interested in using this method and I’ll send you a short pro forma that runs this analysis.

@Mike Hern

Hopefully the developers that build real homes have access to real wet water rather than water rights…I heard a short while ago that water was an issue in this market.

@Michele Bronner

Ya’ll need to hang a little more meat on that bone Michele.

I understand what you mean by "making a call" and living with it. I broke ground on a mixed-use high-rise project in downtown Seattle in the early 1980s. We poured a floor a week on a 38-story building and EVERY week, the prime rate went up a point and stopped somewhere around 19%...so much for griping about today's rates.

The market we were playing to was the new "empty nesters" that were emerging and wanting to sell their homes on Lake Washington or the gold course and move into downtown hi-rise living in a then gentrifying city.

The only thing that allowed the project and me to survive was my "bodyguard" money partner, a Canadian bank that gave us the ability to hold ~130 units until the rates came down from the clouds and some form of rate sanity returned.

@Jay Hinrichs

Congratulations on your success and thank you for the information on your market and development performance

@Faiz Kanash

Your first order of business should be to become financially literate and learn the metrics of CRE so that you can apply them to conduct pro forma modeling.

There is no way to properly assess the value or performance of any real estate asset without having these basic skills.

Please let me know if you have any questions or need any help getting started.