All Forum Posts by: Jerry Poon

@Jerry Poon Unfortunately this information is tough to come by for free, though you might want to ask brokers you work with if they have data, including old REIS reports, which usually track about 5 years back.  

You may want to see if REIS or CoStar has this data as well.  You will have to pay for it, but their reports are less expensive than losing a lot of money. 

 It’s important not to get caught in the newbie trap of thinking that, because a market is cheaper than yours, it’s a bargain.  We’re at the tail end of a very long national bull market for property that has pushed down returns everywhere.  When looking at a market outside your own, you need to compare it to its own historical returns, not the returns in your expensive area.  If not you could be in for a nasty surprise when the inevitable correction hits, and when it hits, it will hit these “bargain” markets the hardest.  They are cheaper for a reason.  

@Jerry Poon Hmmmmm...if you have 30 year fixed-rate mortgages I wouldn't pay them down.  Money is "cheap" but if you have a commercial loan that's going to reset in a few years then you can reap the benefits then.  That said, you want to keep enough of a mortgage interest payment where you don't end up getting hit with taxes because depreciation isn't enough to offset the income.  Anyway, all my blah blah blahing aside...

What you can do is juxtapose the amortization tables with and without the prepayments that you're doing.  You'll see how much more is going to mortgage principal vs. mortgage interest when you do a prepaying.  It's not much but it's probably a 4%-5% return.  I did the exercise with a commercial loan that I have and it's nothing to get too excited about :-)  Still, it's better than the bank checking account.

Anyway, another way to skin the cat is to look at RoE (return on equity). But really, at the end of the day, you're going down the "pick a metric" road. I wouldn't worry too much about it. Just because one person looks at CoC and another looks at RoE doesn't make one right and one wrong.

 A - Increasing cash flow by using your own money is an illusion.  Before you get a profit from it, you have to catch up to the negative cash you spent to pay down the debt

B - How does a downturn impact your ash flow