Commercial Real Estate Basics
You Need to Know the Vocabulary
You must familiarize yourself with the following:
-Gross Income -Vacancy Rate -Effective Gross Income (EGI) -Operating Expenses -Net Operating Income (NOI) -Debt Service -Cash Flow -Cash on Cash Return -Capitalization Rate (Cap Rate)
You Need to Know Percentages
You will need to know and understand what percentages are acceptable for most of the vocabulary words above. Percentages will also play a part in how you structure the deal with your investors in terms of preferred rates of returns, cash on cash returns, and internal rates of returns. You need to understand percentages and how to calculate them with nothing more than your brain or a basic calculator.
You must Internalize and Understand what the information shows
After understanding the vocabulary and the percentages, then you must be able to put all that information together and understand what it all means. Do you know what a cap rate of 5% means in your marketplace as opposed to a property that has a cap rate of 10%? Do you know what operating expenses of 55% mean on a property as opposed to operating expenses of 25% on a similar property?
The numbers tell a story, can you put it all together?
Contact me if you want comprehensive and efficent help with any commercial related questions.