Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Contents

List of Abbreviations

Introduction

Chapter 1 An Overview of the Problem, a Solution, and a Game Plan

The Problem

The Solution

Four Key Elements in the Solution

Concerns about the Solution

Acquiring the Skill Set to End the Cycle

A Game Plan to Achieve the Solution

This Book Is about Center B Properties

Chapter 2 The Basics

Gross Income: The Starting Point

Vacancy and Collection Loss: Gross Income Reducers

Operating Expenses and Net Operating Income

Fair Market Value and Capitalization Rate: What's It Worth?

Gross Rent Multiplier

Value per Square Foot versus Reproduction Cost per Square Foot

Inverse Relationship between Cap Rate and FMV

Initial Determination of Value

Leveraged Return and Return on Equity

Cash Flow before Taxes (CFBT)

Reserves/Impound Accounts

Taxes and Insurance Impounds

Cap X, TIs, and Leasing Commissions

Devil in the Details: Over Simplified Analysis

Chapter 3 Detailed Financial Analysis

Gross Income

Vacancy and Collection Loss

Operating Expenses

Four Basic Types of Leases

Nonrecoverable Expenses

Time-Frame Assumptions

Static versus Active Analysis

Compounding

Rent Roll

Argus Ten-Year Discounted Cash Flow Model

Analysis Reflecting 100 Percent Occupancy

Reversion

Disposition Costs

The Time Value of Money: Present Value and Discounted Cash Flow

Net Present Value (NPV)

Internal Rate of Return (IRR)

Conclusions from Argus Analysis and the Hypothetical Facts

Analysis Reflecting a Large Vacancy after Purchase

Analysis Reflecting a Large Vacancy with a Tenant ...