Commercial Real Estate Investing - Education

Book Summary:
Title: Commercial Real Estate Investing - 12 Easy Steps to getting Started
Author: Jack Cummings

"Hi, I just want to add some value and share some interesting way to get started."

Commercial Real Estate Defined:
Any Real Estate that has the ability to produce outside revenue or income for you as an investor.

Investment verse Use
A property that you wish to invest in, is a property that you will anticipate a profit at a future date.

A property that you intend to use may end up being a good investment, but your original goal is not to profit directly from the real estate, but rather, to profit from your personal use.

Comfort Zone

In order for you to invest and sleep at night, you need to cut out an investment area call the comfort zone where you know exactly what is going on.

Realistic Goal setting <--- Refer to my later posts on goal setting-it's a must do.

Invested Amount = Cash + Debt + Time

What Makes Real Estate Value go up or down?

Community Planning
Departments of Transportation
Fire and Health Codes
Lack of Concurrency -current requirement to enable you to develop the property
Land Use Changes
Condemnation and Eminent Domain Proceedings-government purchase and use of the ppty
Building Moratoriums- fast pace level of services available to ppl is outstripped
Economic Obsolescence- value of the actual use of the ppty comes to halt
The Rule of Small- small movements in the smallest increment of income stream having high impact on largest element of income stream.

Detail:

Monthly rent per apartment $ 650
Gross rent per month from 10 apartment $ 6,500
Annual revenue $ 78,000
Income less operating expenses $ 58,000 (Not including debt service
An investor will buy at a 9 percent return $644,444 ( max price investor pays )

Increase Rent
Decrease expenses
Leverage the transaction
Do a combination Above

let say Rent got increased to 675, expenses cut by 300 80% loan from at 8%

Gross rent $ 81,000
Less new expenses $ 16,400
New Net operating $ 64,600
Annual cost of debt $ 41,244

New Cashflow $ 23,356
Captial invested $128,889


Price $644,444
Loan 515,555
Cash invested 128,889
Cash flow $23,356

Return on Cash 18%


Six Primary Factors that makes R/E value

1 Supply and Demand
2. Local Zoning
3. Changes in infrastructure
4. Economic obsolescence
5. Maintenance procedures
6. Motivation to buy or sell