All Forum Posts by: Jason Howell

 Awesome insight. First paragraph was a great reminder of assumed risk in this scenario. Everyone has an angle. :)

Thank you!!

Ahhh yes Rentometer. Thanks for the swift kick to the head, I spaced that one.

Generating value on income that isn't proven is a prime reason why relying on a seller's proforma without doing your own numbers rarely tells the story. It's inflated, and in the case of larger scale commercial units, the most valuable information is what it CURRENTLY does, not what it COULD do. (just thinking through this out loud here)

Thanks for your explanation here! Super helpful. Appreciated!

So in their mind, there is potential for increasing rents and that justifies a higher sale value... Obviously as a potential investor, I would have to feel comfortable that the increased sale price is justified based on the potential upside post-acquisition. (thank you by the way!)

To compare the market rents against other similar properties, I could look at a map and find similar size apartment buildings in the area, and contact them to find the price range and configuration of their units to compare against... perhaps contact local property managers who might manage properties like this to see what they can share... Am I missing any other good sources for this info?

Also:

This property has a 1% vacancy rate... all units have been leased for around 10 years according to the listing. But placing 1% as the vacancy rate for the next five years seems overly optimistic. Would you bump that up and if so, where would you pull that figure from? On my own rental properties I'm used to assuming an 8% vacancy rate, so I'd opt to do that... but is there a more accurate estimation to be made?

Note: I'm self educating on Commercial Real Estate deal analysis, so pardon the elementary question(s) (I'm sure there will be more!) But I want to be sure I'm understanding even the basics of this correctly. I'm using Loopnet to find deals and work the numbers, it's merely an exercise to get more comfortable running numbers:

The "deal": http://www.loopnet.com/for-sale/ca/?bb=g22p8rl53Ph...

Straight away, I see the purchase price of $1.7mn. I see in their supplied Proforma that Net Operating Income is $75,720 and their listed Cap Rate is 5.11%.

When I do the formula for finding value (value = NOI/Cap Rate), I end up with $1,481,800.

What this appears to tell me is that they are charging a $218,200 premium over the value of the property when figured against a Cap Rate of 5.11%, correct? Is this an immediate indication that buying at the $1.7mn price point is likely overpaying for this particular property?

 Yeah, exactly why I wouldn't want to loop in with Agents at this time quite yet. I'm not entirely sure why my brain decided to completely forget about Loopnet! It was already on my radar but apparently dropped off momentarily.

I shall begin analyzing deals from there to get more familiar with the full analysis process. Challenging myself to do a new property every day for a week to start, and I'll go from there.

Thank you so much!!

Where's a good source of CRE investment opportunities with which to run numbers to refine my new analysis knowledge?

I finished taking a CRE analysis fundamentals course this month, and I have all of this new knowledge on taking a commercial investment opportunity, and running the numbers to devise my own proforma, as well as evaluate important things like future value of money, etc... All of this new knowledge that I really want to apply to a host of commercial RE opportunities to ensure I GOT it. At this stage, not necessarily to jump on one, but really to reinforce this new education so I can get more comfortable running these numbers.

I don't want to waste a broker's time as (at this specific stage) I'm not looking to purchase quite yet. Heck, the pool of investment opportunities don't even need to be that great as doing the numbers will help me see how not great they really are and even that is valuable. But having some sort of a group of properties with enough details to allow me to really get in there and work with the numbers for analysis purposes.

What do you suggest? Thanks!

The fact that experienced investors take the time to break this stuff down for those of us learning the ropes, and in such detail, AND with such grace, makes me continually realize just how awesome Bigger Pockets is time and time again. Thanks to all who pitched in for this education.

 I actually just watched a BP video this morning where @Brandon Turner talks about this very thing. Looks like I need to pick up the book listed above to learn all about HOW to go from setting a seemingly lofty goal to realizing the benefit of shooting high. Thank you so much!

 Awesome, thanks for the reminder. I've heard about this book but it fell off my radar. Looking at the table of contents, this is exactly what I'm looking for! Thank you!!