All Forum Posts by: Pratap Koppula

$1,000 rent per $100K Invetsment is the safe bet, if no numbers are available. To futher drill down on expenses, you can plan and estimate below items.

1. > Vacancy loss - based on vacancy and rental demand
2. > Repairs and improvements - condition of the proprty
   
3. > Property taxes- location and assessment (market) value
4. > Insurance - can request some quotes
5. > Maintenance - Can resonably estimate (Owners will be able to answer this easily).
6. > Management fees - Can get a quote
7. > Utilities - see if its common or tenants pays 
8. > General expenses and other professional services ball park 2K to 3K depending on location and entity type etc.

I have written a series of blog posts on the same topic and have some in early drafts to share, if you like the sample.

Real estate valuation based on potential income and cash flow is a powerful tool for assessing the value of a property. Depending on the asset class, such as rental, hotel or development projects, income projections can vary significantly.

RENTAL PROPERTIES

The first step in making rental income projections is to identify the rental market in which the property is located and consider the following factors when adjusting the future rental income:

• > Current rents
• > Caveats on rental increase and tenant removal
• > Market rents
• > Occupancy loss
• > Economic conditions

It is important to remember that often the listed potential rents for properties may not be realized immediately and the future rates should be adjusted accordingly.

HOSPITALITY

Hospitality is a cyclical and seasonal industry, making it difficult to accurately forecast long-term sales due to the ever-changing market environment. Nevertheless, past performance can be used as a guide to reasonably predict future sales, as the seasonal nature of travel is fairly consistent.

The Smith Travel Research (STR) is an invaluable asset for leaders in the hospitality industry, providing five years of data on occupancy, room rates, trends and competition. This report can be used to forecast occupancy and room rates, allowing for informed decisions such as setting room rates and staffing levels. Additionally, the report provides insightful analysis on supply and demand trends, as well as competition and penetration. This data can be used to create accurate forecasts, assisting in strategic decisions.

DEVELOPMENT PROJECTS

Real estate development projects involve a great deal of research and planning in order to determine the feasibility of a proposed project. The income projection is one of the most important elements of the analysis and is used to determine the potential profitability of the project.

Income projection involves estimating the potential income streams of a real estate development project. This includes estimating the potential rental income, potential capital gains, and potential sales proceeds. It also involves estimating the potential costs associated with the project such as land acquisition, construction, and other development costs.

Estimating the potential customer pool for a project requires predicting demographic characteristics such as age, income, and other characteristics. This helps to determine the number of customers the project is likely to attract and the estimated price for each unit.

Careful planning is essential for successful income projection, with reasonable precautions taken for cost overruns and economic slowdowns. Forecasting revenue streams for development projects can be challenging.

In the next post we will cover Cost Projections.

Take this real estate strategic investing financial tool into your new years’ plan.

Financial analysis helps investors assess risks and opportunities, compare different investments for returns and cash flow, and make informed decisions about real estate investments.

Financial modeling includes the following critical components:

• Income projections
• Cost Analysis
• Labor Analysis
• Operating Cost Analysis
• Cash-flows
• Capital structure

Income projections:

Valuation of an asset depends on its capacity to generate future cash flows. To determine this, one must forecast the asset's income over a period of reasonable period, say five years.

Cost review: Cost review is a vital part of due diligence to ensure project all project costs are considered. Buyers should research costs to ensure they are prepared for future expenses.

Labor considerations:

Labor considerations are an intricate part of labor-sensitive projects such as construction, hospitality, infrastructure and industrial projects. Understanding labor availability and costs is a major challenge in such projects.

Operating Cost Analysis

Operating cost analysis is used to measure the expenses associated with running a property, such as maintenance, utilities, and taxes, to evaluate the profitability of a potential investment. It is often measured as a % of sales to understand how expenses relate to revenue as a variable cost. This helps investors make informed decisions about whether a property is a good investment.

Cash-flows:

Analyzing free cash flows for both Debt and Equity is a key element in real estate investing. It helps to assess the potential returns, risk and overall financial performance of a real estate project.

Capital Structure:

A well-structured capital structure is essential for any deal to maximize returns while a high equity helps lower interest, high leverage helps higher returns. It is important to strike a balance between debt and equity to achieve the desired level of leverage and optimize the returns from real estate investments.

In the next post we will cover ‘Income projections’ for financial analysis.

Market research and feasibility reports are essential for project success. This article will explain the key elements of these reports and how they can be used to evaluate project viability.

Population

Population is a key indicator of regional economic growth, researching their income, age, lifestyle and other characteristics. Analyze the potential size of the target market and the potential for growth.

Income

People's income is a key factor in determining the viability of a real estate project, as it is a major factor in the ability of potential buyers to purchase the project's properties.

Employment

Employment is a key factor in determining the viability of real estate projects, as it can influence the demand for housing and investment returns.

Transportation

Transportation is essential for a real estate project's viability, as it affects its attractiveness to potential buyers and renters.

Regional analysis

Real estate transactions are heavily influenced by regional forces such as social, economic, government and environmental factors. Regional analysis provides a comprehensive understanding of data to better comprehend the economic climate of a given area.

Neighborhood analysis

Neighborhood is a key factor in successful real estate projects, as local amenities, infrastructure and socio-economic factors can all affect its value.

Site description

Site description includes facts about location, configuration, topography, drainage, soil and subsoil, hazards, easements, deeds, restrictions, encroachments, access, utilities, and zoning.

Improvement descriptions

Quality standards for foundaion, exterior, interior, windows, doors, lighting, HVAC, fire protection, parking, ADU, and functional utility specified in construction details and specs.

Project viability

The economic viability of the local area is essential to the project's success. Factors that influence this are demand/supply, historical trends, and potential cash flow. Evaluating these helps assess the projects' viability.

Evaluate Risk:

Evaluate the risk of the project, including potential for delays, cost overruns, and market fluctuations.

That wraps today’s post. In the next post I will cover ‘Financial Analysis’, be sure to click on my profile and hit “follow”

Selecting the right real estate investment is a critical step that can set the tone for a successful business model. It requires careful research and consideration of all factors involved, including location, budget, and desired features.

Real estate project selection factors depend on the type of project, such as rental, hotel and construction. Additional criteria that must be met for every project must be applied in addition to the essential criteria listed below.

Defining the Opportunity

Real estate investment provides an attractive potential for generating returns. Knowing the value proposition is key to defining the opportunity.

Location Analysis

Real estate location analysis helps to evaluate potential properties and understand the local market. It includes

• Proximity to public transportation
• Accessibility to local amenities (schools, hospitals, shopping, etc.)
• Quality of the local real estate market

Market Research

Real estate market analysis involves studying the current market and predicting future trends.

• Review of local and regional trends in the real estate market
• Analysis of local demographics
• Assessment of local economic conditions

Project Goals

Goals provide a clear direction for the progress, real estate investment goals include, maximizing profits, increasing ROI, diversifying portfolios, and providing affordable housing.

Project Scope

Setting a budget and timeline is essential to define the scope of any investment project.

Financial Analysis

Financial analysis and key performance indicators provide crucial data to assess investment feasibility and make well-informed decisions in real estate investments. These include CAP Rate, Cash on Cash, Debt Service Coverage, IRR, NPV and so on.

Risk Matrix

Risk matrix helps in assessing risks associated with real estate investment decisions.

• Identification of key risk factors
• Evaluation of potential risks
• Creation of mitigation strategies

Environmental, Social and Governance (ESG)

ESG in Real Estate encourages responsible investments and sustainable practices. It is key for investors to consider ESG factors when making decisions, as Real Estate has a greater impact on your investment than other sectors.

That wraps today’s post. In the next post I will cover Market analysis and Feasibility study.

This is the beginning of a series of posts I will be publishing on ‘Building a Diversified Real Estate Business Through Investment Strategy, Risk Management and Portfolio Management. I’d like to set the stage with this overview post.

In order to build a diversified real estate business, it’s important to step back and look at the real estate life cycle. This cycle involves planning, acquiring, operating, and improving the asset.

Successful real estate businesses are built on these three pillars:

• Investment Strategy
• Risk management
• Portfolio management

A comprehensive strategy leverages investment strategy, risk management and portfolio management. Investment strategy includes the identification of target markets, selection of investment, development of a timeline, and the creation of a budget.

Risk management entails identifying risks and devising strategies to counter them. When formulating an investment plan, investors must consider rate of return and risk factors.

Portfolio management involves diversifying assets to protect against market risk and generate returns. Creating a diversified real estate portfolio of different sizes and types in multiple locations, with varying financing structures and cash-flows, can reduce risk and create steady income.

Here are the guiding principles for building a diversified portfolio:

1. Create a diversified real estate portfolio to meet your investment criteria.
2. Research different types of real estate investments based on your risk appetite and cash-flow needs (Rental, Commercial, Hospitality, Industrial)
3. Develop a timeline and budget for real estate investments and decide affordability.
4. Evaluate markets to determine profitable real estate investments.
5. Evaluate potential risks and opportunity (Core, core plus, value add, and opportunity).
6. Calculate potential returns, monitor portfolio and adjust as needed, to meet your goals.

That wraps today’s post. In the next post I will cover RE Strategy essential elements.

Real Estate is an affordable small business with a predictable cashflow and attracted millions of investors.

The Biden's tax rate amendments on Capital Gain rate hikes and like kind exchanges not only hit the wealthy, but it also impacts millions of Professionals around the real estate services and significantly dents the volume and economic returns in reality.

Appears they forgot the morality learned from the farmer and golden eggs story, not to pull off all the eggs at once, with capital punishment.

You need to raise to be equal.

Do you know any lenders open for hospitality (Hotels & Motels) now.

To simplify, you want to have basically two portfolios. One with Multifamily with an additional cash reserve and another extra reserve as bit coin. I am not sure what value you bring to bitcoin as a portfolio manager if its price depends on stock market, and really you dont have anything to contribute.

Bit coin solution for RE, the basic questions I had in my mind are,

• Do you have a seller who accepts bitcoin?
• Do you have a banker who takes bitcoin as down payment?
• Do you have a handyman who accepts bitcoin as a compensation?

This is exactly like having a ton of gold and doing a barter. The gold has an underlying asset value and physical substance, where as bitcoin is like treasury bills, no true value unless others accepts it, as you can keep printing, loses the value.

If everyone comes with their own currency equivalent, which one you take?