Commercial RE Facts on Income Producing
The basic elements of an investment are cash inflows, outflows, timing of cash flows, and risk. The ability to analyze these elements is key in providing services to investors in commercial real estate.
Cash inflows and outflows are the money that is put into, or received from, the property including the original purchase cost and sale revenue over the entire life of the investment. An example of this sort of investment is a real estate fund.
Cash inflows include the following:
- Operating expense recoveries
- Fees: Parking, vending, services, etc.
- Proceeds from sale
- Tax Benefits
- Tax credits (e.g., historical)
Cash outflows include:
- Initial investment (down payment)
- All operating expenses and taxes
- Debt service (mortgage payment)
- Capital expenses and tenant leasing costs
- Costs upon Sale
The timing of cash inflows and outflows is important to know in order to project periods of positive and negative cash flows. Risk is dependent on market conditions, current tenants, and the likelihood that they will renew their leases year‐over‐year. It is important to be able to predict the probability that the cash inflows and outflows will be in the amounts predicted, what is the probability that the timing of them will be as predicted, and what the probability is that there may be unexpected cash flows, and in what amounts they might occur.
Investor Guide – Table Of Contents
Click Here : Investment Property Guide
- Adding A Home To Your Investment Portfolio Investors Are Becoming Landlords
- What Is An Investment Property?
- Things To Consider Before Investing Does An Investment Property Fit Your Financial Plan?
- Do You Want To Be A Landlord?
- Location, Location, Location
- The “Typical” Rental Property
- Setting Parameters
- Beginning Your Search The Preapproval Process
- Shop Like An Investor
- Considering Condos or Co-ops
- An Expert Home Team Makes A Big Difference Building Your Team
- Real Estate Agents
- Appraisers Investment Property Financing Experts
- Follow Up Teamwork With Homework Do Some Research
- How Much Should Your Property’s Rent Be?
- Calculating Cash Flow
- Tax Implications
- Applying For Your Loan
- Preparing For Closing
- Renting Your Investment Property Finding The Right Tenants
- Setting Your Standards
- Preparing a Lease: Get Legal Advice
- The Lease-To-Purchase Option
- Maintaining Your Investment Property Keep Your Investment In Shape
- The Property Manager Option
- Additional Resources Investment Property Checklist
- Real Estate Listings Decoder