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Showing posts with label Investment Properties. Show all posts
Showing posts with label Investment Properties. Show all posts

Monday, November 26, 2018

11/24 Peter Scarcello & Ed Forbes

Your host, Peter Hunt, welcomes Peter Scarcello & Ed Forbes to the show.

Peter Scarcello is the Buffalo/Niagara General Manager for HUNT Real Estate ERA and Ed Forbes is the Director, Training and Consumer Engagement at North Jersey Media Group.

Together, Peter leads the discussion on investment properties.

To find out more, listen to this week's show. 


Tuesday, January 29, 2013

Net Present Value is a Valuable Tool for Analyzing Investment Property

A message from Greg Oehler, COO of HUNT Commercial




Investment property is a worthwhile undertaking, if it creates value for the owner. In the most general sense, we create value by identifying an investment worth more in the marketplace than it costs us to acquire. The difference between an investment’s market value and its cost is called the net present value (NPV) of the investment. In other words, NPV is a measure of how much value is created or added by taking on an investment property.

Suppose you are considering the purchase of a property for $1,000,000. The property has a single, high credit-rated tenant; the lease is triple net and there are eight years remaining. The property generates $45,000 net cash per year. If 20% is the down payment and your required discount rate is 14%, what is the NPV on this property?

Since the cash flows are equal each year, we effectively have an eight-year annuity. Using an annuity table, we can determine that the factor for 8 years at 14% is 4.6389. If we multiply the annual cash flow by this factor we get $208,750 (these are the discounted cash flows). Subtracting our down payment of $200,000 we end up with $8,750, therefore, this is a good investment. Had the result been negative, then the effect on value would have been unfavorable and we would pass on this investment opportunity.

Sounds simple, doesn’t it? Calculating the NPV is fairly straightforward; however, the task of coming up with accurate cash flows, determining future market value of the property, and selecting the correct discount rate is much more challenging. HUNT Commercial Real Estate has the experience to provide comprehensive investing solutions, and licensed professionals across Upstate New York to give you expert local support.

For more information about HUNT Commercial and our services, visit www.huntcommercial.com, or call Greg Oehler directly at (716) 880-1915. For the location of a HUNT Real Estate ERA office near you, visit www.huntrealestate.com, or call (716) 633-9400.

Thursday, December 6, 2012

Be Proactive When Selling Investment Property, Anticipate Areas That Could Break The Deal

A message from Greg Oehler, Chief Operating Officer at HUNT Commercial 




Sometimes, when buying investment property you feel like you’re walking through a minefield. You look at properties available, have a licensed real estate professional draw up a contract, get necessary documentation from the seller and then, out of the blue the deal explodes! What appeared on the surface to be a solid investment suddenly vanishes into thin air. Now it’s back to the drawing board for everyone involved. What happened?

Were the expenses understated? Was the existing mortgage information incorrect? Were the rent rolls accurate? Was the property assessment misrepresented? Closely examining every investment property will usually reveal areas of concern that may need serious attention. If nothing else, be proactive, ask questions, seek total understanding of the property and its financial performance. By doing so, you will save a lot of time and eliminate the frustration of having to walk away from the deal.

For example, suppose the net operating income for a large apartment complex appears to be rather low. First, examine the expenses and verify their accuracy with the owner. If they are overstated, that will improve the financial picture. However, if the expenses are accurate, then look at each expense item to see where money can be saved. If the insurance appears too high, ask one of our HUNT insurance agents for a policy review to see if money can be saved. If the interest expense is too high, call HUNT Mortgage or a commercial banker and see what they offer. If the property uses a management company, are their rates competitive? If the complex does the landscaping and snowplowing, could they contract it out or vice versa and save money? Are the property taxes too high? Is the assessment accurate? Does the local municipality offer PILOT (payment in lieu of taxes) programs? Every major expense category can and should be examined for possible savings. In addition, examine the rent roll. Are the rents too low? When was the last rent increase? Is there opportunity to increase the monthly rates?

An experienced real estate salesperson can assist you in asking the right questions early on in the game. Certainly due diligence will uncover possible “deal breakers,” but why wait? Take it upon yourself to carefully study the numbers, look beyond what you see on paper and develop strategies to improve the rate of return.

The point being, work with your real estate agent to come up with alternatives. Take the initiative, and talk to other professionals: insurance agents, mortgage brokers, bankers, management companies, municipalities and landscapers etc. By doing so, you will improve the value of the investment and save yourself time and money. Contact a HUNT Commercial real estate agent today and find an experienced professional to help you make the right decisions!

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