 Now that the Real Estate Market is recovering, maybe it is time to invest in commercial real estate? If someone does, how do they know if they are making a reasonable rate of return on their investment. The following are 2 basic ways to calculate the return. 1: Cash on Cash Return How much money is needed to be invested in a property now to generate return at the end of the first or following years? If a minimum of $50,000 is invested in a commercial property and at the end of the year after servicing the debt (principle and interest) and all other expenses $5,000 is returned. $5,000 divided $50,000 is 10%. This is the cash on cash return. Investors use this method to gauge how an investment is performing on a year by year basis.
2: Capitalization or simply “Cap Rate” This is calculation used in the real estate market to compare different commercial real estate investments. Subtract the total expenses from the gross income to get the net operating income. Divide the net income by the capital cost (the price paid for the property or the market value) and this gives the “Cap Rate”. This is the most commonly used calculation used in the commercial real estate industry and will give a “snapshot” on the financial health of the investment. Knowing these two basic terms helps potential commercial real estate investors communicate with companies that provide professional commercial real estate services. One such company is First Fidelity Realty DeSimone in Henderson, Nevada. First Fidelity Realty DeSimone specializes in sales, leasing and development acting as principals and brokers. Anyone who is interested in investing in the lucrative Vegas Valley Commercial Real Estate Market should contact Joe DeSimone at 702 990 8660.
13 Comments
3/10/2023 06:46:40 am
This is calculation used in the real estate market to compare different commercial real estate investments. Subtract the total expenses from the gross income to get the net operating income. Thank you for the beautiful post! 3/11/2023 11:16:22 am
This is the most commonly used calculation used in the commercial real estate industry and will give a snapshot on the financial health of the investment. Thank you, amazing post! 9/7/2023 12:22:34 pm
These two basic terms helps potential commercial real estate investors communicate with companies that provide professional commercial real estate services. Thank you for the beautiful post! 7/6/2024 05:06:53 am
This is the money on cash return. Financial backers utilize this strategy to check how a speculation is performing on a step by step premise. I’m so thankful for your helpful post! 7/6/2024 05:07:15 am
This is the money on cash return. Financial backers utilize this strategy to check how a speculation is performing on a step by step premise. I’m so thankful for your helpful post! 11/11/2024 07:52:41 am
Great article on how to calculate the return on a commercial real estate investment! The detailed steps, including understanding net operating income and cap rates, provide valuable insights for investors looking to assess potential properties. It’s crucial to factor in operating expenses, financing, and market trends to get an accurate picture of returns. Thanks for sharing these practical tips for making more informed investment decisions! 11/12/2024 08:08:40 am
This blog post on calculating return on commercial real estate investments offers valuable insights into key metrics such as ROI, cap rate, and cash-on-cash return. Understanding these measures is essential for investors looking to evaluate the profitability of their investments. By considering both income and expenses, investors can make more informed decisions and maximize returns. 11/13/2024 06:36:03 am
Great post! It highlights key considerations when calculating the return on a commercial real estate investment, such as determining net operating income (NOI) and understanding various metrics like cap rates. These are crucial in evaluating profitability. It’s also important to factor in financing costs, taxes, and potential appreciation. The advice on using these numbers to make informed decisions is incredibly helpful for both new and seasoned investors. 11/14/2024 07:24:56 am
Thanks for the insightful breakdown on calculating returns for commercial real estate investments! Understanding the importance of metrics like Net Operating Income (NOI), Cap Rate, and Cash-on-Cash Return can be incredibly useful for making informed investment decisions. These calculations provide a clearer picture of potential profitability, helping investors assess risks and rewards more effectively. This post serves as a great guide for anyone looking to maximize their returns in commercial real estate. Appreciate the detailed explanation! 11/15/2024 05:33:45 am
The blog offers a clear approach to calculating the return on commercial real estate investments, explaining the key metrics like ROI, cap rates, and cash-on-cash returns. These calculations help investors assess the profitability of their properties. I appreciate the detailed breakdown, making it easier to understand these critical financial concepts for evaluating investment opportunities. 11/19/2024 06:39:27 am
This post provides an in-depth look at calculating returns, essential for anyone looking to invest in commercial real estate. Practical and informative! 11/20/2024 07:39:10 am
The detailed breakdown of ROI calculations equips investors with the tools to make informed decisions. It’s a must-read for those in commercial real estate. Leave a Reply. |
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