This is a current real estate investment analysis created for an active listing that is not mine. However, I have intimate knowledge of this building from previous successful leasing negotiations.
This report displays a variety of financial measures an investor would use to determine a worthy acquisition.
Notice the Cap Rate is 6.46%. This report chose to use capitalization rate as a common financial measure.
Lets talk about Cap Rates and why it is often misunderstood.
Notice the Internal Rate of Return (IRR) with financing and without.
Lets talk about what factors comprise the IRR and how it differs from the Cap Rate as a financial measure.
Notice how the Loan To Value (LTV) effects the debt coverage ratio.
In the commercial world, 25% LTV is used by many lenders to achieve an acceptable debt coverage ratio.
These factors amount to a sensitivity analysis which helps us figure out the sales price.
As we continue to forensically analyze this office building for educational purposes I should mention it is available for acquisition. This asset is currently cash flowing and is 93% leased.
Well, this is a meat and potato post for real-time content here for us to collectively explore together in a collaborative fashion. Let us get serious about commercial real estate investing by running the numbers and reviewing our input values.