All Forum Posts by: Kristina Sparrow

@Josh Rodriguez May favorite resource is www.datausa.io . You can search any state, city, metro, zipcode, etc and find a bunch of useful information on cool interactive graphs.

@Ingrid J. Nice list, we have some overlaps. My goal for 2020 is one book a week. Nine books down already. Best of luck to you and your goals!

The one thing by Gary Keller

Other than recommendations from BP users, you can do a quick search on LoopNet to find the active brokers in your market

Yes, this is possible. You need to find a good SEC attorney to work with. They will advise and draft documents for you on the correct company structure, operating agreement, and PPM (private placement memorandum).

A couple of important factors to consider for a market are job growth, population growth, and wage growth. You could do a quick google search for any of these terms like "top cities for population growth in 2020" and find a variety of lists. You want to find stable, but growing markets. 

Hi Jason. The most important numbers you should determine are the property's NOI (net operating income) and a market cap rate for your area. These will both determine how much you should offer for the property.

NOI is calculated as annual income less annual expenses. You figure out the annual income by determining the total potential market rent for the units by doing research on what similar units are renting for in your area. Don't just trust what the current owner is telling you, you could be missing hundreds or thousand of dollars of value. To figure out annual expenses, you should request actual financials from the owner to see how much they currently spend to operate the property (repairs, management, utilities, marketing, etc). But again, don't just trust what the owner sends you. Do your own research on what it would cost to efficiently operate the building. You could reach out to local property managers, brokers, or investors to find out typical costs. For a quick analysis you could use a 35% - 50% expense ratio.

Once you have your NOI, you divide that number by a market cap rate (typically 6% - 10% depending on your market) to determine what your purchase price of the property would be. You can figure out a cap rate by doing research for comps online, or asking a local broker or investor.

Side note: if you are considering building a shed or storage units, you should research the property's zoning laws to determine if that is allowed. 

Cheers!

No, debt service is considered a "below the line" expense that affects net cash flow but is NOT included in NOI. The reason is because different operators will have different financing methods and rates and it is not a cost that is intrinsically necessary for operating the property (net operating income). Since the price of commercial buildings are valued based on NOI, including debt service or interest expense would be a huge and unnecessary hit to your purchase price when sending out offers.

My favorite sources of data are professional research reports from organizations like ULI, NCREIF, or brokerage companies like Marcus & Millichap or CBRE.

If you are just turning and releasing the unit after a tenant moves out, I would classify this as OpEx (turnover expense, or make lease ready expense). These would be small repairs like paint, replacing the carpet, cleaning, small cosmetic repairs. If you plan on doing more extensive renovations after a tenant moves out, like replacing flooring type, appliances, cabinets, countertops, bathroom renovations, this would be considered CapEx because it adds value to the property.