Net Operating Income
Understanding Net Operating Income
There are numerous relevant metrics in commercial real estate, but few are more important than net operating income (NOI). The NOI is used to demonstrate how much revenue a certain investor would be expecting to get from a project. It is a comprehensive figure that considers all revenue sources and all operating expenses.
To get the net operating income, just deduct your operational expenses from your total (gross) income. Simple enough, right? Though the process is straightforward, it is imperative to begin by answering a few essential questions. The definition of gross income What expenses are regarded as operating costs?
Detailed Analysis of Net Operating Income
Revenues and costs make up the operational part of a real estate project, as mentioned. The final amount should be reasonably simple to compute since, in an ideal world, it will be simple to locate these data on any income statement.
The monthly rent and fees paid by the residents are the main source of gross income in a traditional project, such as an apartment complex. Although renters could occasionally be overdue with their payments, the lease’s structure will make these sources of income predictable. In addition to paying rent, apartment complex tenants may also require to pay parking fees, required utility expenses, reservation fees (such as a “party room”), laundry fees, and many other fee types. These revenues are all included in the overall income since they are “operational.”
To determine how much money a property may generate over time once you have calculated the overall income. You must, of course, consider all of your expenditures to determine if this property is lucrative. If operational costs exceed gross income, the NOI will eventually be negative. It indicates that your existing methods are not sustainable.
The overall operating expenditures should include all charges that link to maintaining the property. It can cover a range of payments, such as personnel fees, utility costs, and non-capital items required to maintain the structure. It is crucial to remember that taxes and capital expenses are not included in these costs.
NOI = Total Income – Total Operating Expenses
What Is the Purpose of Net Operating Income in Real Estate?
If you haven’t noticed, NOI is identical to EBITDA (earnings before interest, taxes, depreciation, and amortization) but applied to commercial real estate. The amount of takeout cash you make from the particular contract will be less than your net operating income since after all production costs are already covered, there will still be capital expenses to be paid.
Nonetheless, NOI is a very helpful statistic, particularly when comparing different features. Separating capital and operations costs might be beneficial since it allows you to understand the property’s “raw” profit-generating component. More significantly, NOI is important for other critical calculations, such as the capitalization rate and the debt coverage ratio (DCR), which are incredibly beneficial for lenders and investors alike.
Net Operating Income is also valuable for analyzing a property’s performance and making necessary rent changes. For instance, if the NOI is negative, it is obvious that the building owner will need to either raise the rent on upcoming leases or add more tenants (which won’t be a choice if the building is currently full). This measure, along with others, can help you make more informed decisions.
Capitalization Rate
Like many of the other phrases we’ve heard in syndication, the capitalization rate (cap rate) is frequently used inexactly by professionals in the field. As a result, it is always a good idea to inquire about how a cap rate, particularly a forward-looking one, was established and what assumptions were used. Otherwise, it is quite simple for an asset’s predicted value to be either too high or too low.
In essence, the cap rate represents the yield that may be expected from a property. In the context of stocks, it is equivalent to figuring out the multiple, where a 5% yield (or cap rate in real estate) equals a multiple of 20. Divided by the building’s current market value, acquisition, or development costs, the cap rate is determined by using the net operating income (annualized). Naturally, both the values used in the equation must be correct and presumptions need to be proven for this projection to be meaningful.
Let’s say that your property is currently worth $100,000. After deducting all operational expenditures, you should anticipate collecting $5,000 in rent over the year – the net operating income. You must first compute the cap rate by dividing $5,000 by $100,000 to yield a final cap rate of %
Since cap rates are in percentages, they could be applied to compare various investment alternatives across different real estate asset classes. With cap rate comparisons, for example, you may calculate what type of yield you might expect from investing in flats versus offices versus self-storage, and so on.
Moreover, because a greater cap rate implies a better yield on the investor’s investment, investors will seek to choose properties with higher cap rates. It’s also crucial to remember that projected cap rates for the future are in no way guaranteed and are based on forecasts. In the example, the property may see a decline in rental revenue for a variety of reasons, including vacancies and economic downturns, and as a result, the actual return for any given period in the future may decrease.
Either a reduction in the yield on the original return would lower the holding cap rate, or a potential decline in the property value might result. The second scenario is more likely to occur since similar properties and their cap rates affect the value of a real estate in any particular market. The property’s asking price will go down, as will any buyer’s willingness to spend, if your property’s NOI declines but your value cap rate stays the same.
_______________________Net Operating Income_____________________
Value of a Building (purchase price or total cost of development) = cap rate
Costs are Calculated Using the Cap Rate
The most beneficial aspect of cap rates is that it allows us to evaluate numerous distinct investment possibilities. Like is a cap rate of 8% desirable? That depends entirely on the investments you make. In most circumstances, an 8% cap rate on an apartment complex would be too good to be true (apartments in most primary and secondary markets command 5-6 percent cap rates in the best cases today). However, an 8 percent cap rate could not be regarded as very powerful if applied to a project including senior housing, for instance.
The cap rate, which measures returns, is based on the risks associated and the alternative options that are currently accessible. The higher the return, the greater the risk. For instance, some investors would choose to take a risk with a property that may guarantee a 5 percent cap rate. Though they may also encounter the danger of losing money in the event of a recession compared with one of the lowest-risk investment options (like a federal bond) that offers a 1 percent return.
A paradigm based on opportunity costs may be helpful when evaluating various investment possibilities. You will lose the chance to invest in other assets if you decide to direct your resources toward an asset. Since it may be used to measure various kinds of real estate investments, the cap rate is a valuable indicator. You will have a readily available number that will allow you to compare investments across various asset classes, whether you are making a single-family, multi-family, hotel, or senior housing home investment.
The advantages of employing the cap rate could be increased further. The cap rate may be used as a benchmark to evaluate properties located in various locations, belonging to different classifications, and owned for some time. The cap rate has one significant flaw, although being a helpful calculation: it only offers a picture of returns at a specific point in time, not investment returns across time.
Investors must therefore utilize other financial instruments to assess the actual risk, like the internal rate of return and the equity multiple, among other returns on each given trade. In conclusion, none of the eight financial principles for understanding real estate investing—including the cap rate—serves as a stand-alone formula for sensible real estate underwriting; rather, each must apply in concert with the others.
Returns
While the idea of returns—the amount you would then receive from a certain investment—is straightforward on the surface, many factors might make projecting and chasing returns a little more challenging. No investor knows if the predicted return on a certain investment is “acceptable” unless they know when these returns may be expected (accounting for the time value of money), how much money they will have to dedicate to the project, and what investment choices are currently available.
Given how freely (and frequently ambiguously) the term “return” is used in the real estate industry, investors should carefully evaluate any data provided. You must decide what concept the figure is trying to convey. Are average returns, total returns, annual returns, interest rates, or a picture of returns the returns we’re talking about? The investor then has to understand the underlying assumptions of the forecasts. If someone projects that property would generate an annual return of $100,000, Instead of $90,000, $110,000, or any other quantity, investors should carefully evaluate the stated amount rather than taking it at face value.
Understanding Various Return Types
The phrase “returns” can refer to various computations, each of which will have advantages and disadvantages as previously mentioned. The four most typical forms of returns employed in the real estate sector return on investment (ROI), return on equity (ROE), rate of return (ROR), and cash on cash, in addition to IRR and preferred returns, equity multiple, and other metrics also covered in this series.
The phrase “returns” can refer to different things, but the return on investment (ROI) is likely the simplest and most popular. Just as the name implies, ROI only reflects how much the project can be projected to deliver, expressed as a percentage of the initial expenditure. The ROI on the (simplified) investment would be 10% if the investor invested $100,000 and sold the property for $110,000.
While ROI and Return on Equity are somewhat comparable, Return on Equity places more emphasis on the equity involved in the project than on the total investment. Since ROE is more accurate than ROI and only relates to the equity invested, the stated amount will frequently be equal to or higher than the ROI. Know that “return on investment” (ROI) is a phrase widely used to relate both returns on equity and returns at the unlevered task level; as a result, it is crucial to be clear about what the term implies and how it was determined. Additionally, it’s critical to remember that none of these figures are annualized; rather, they indicate the potential overall return on investment from a project, irrespective of how lengthy the deal’s life cycle may be.
On the other hand, the Rate of Return has been annualized to account for the time needed to achieve the profits. Like in the previous example, if the investment was done at once, the rate of return would only be 10%. If it took two years to generate the $10,000 profit, the rate of return would only be 5%.
Lastly, cash-on-cash is a measure of how dispersed cash at any given time compares to the sum that was first invested. Comparing the yearly cash flow to the initial capital invested provides a gauge of returns. The method also enables the investor to account for the project’s usage of leverage. The benefit of employing the cash-on-cash formula is that it allows you to evaluate investment prospects using a statistic that is quite simple to compute. The formula, also frequently referred to as the cash yield, is used to know the total ROI.
Investors can learn how much return they could be able to get based on how much of their own money they invested by looking at the cash-on-cash return. The formula offers a picture of how much income an investor may anticipate making at any particular time, making it one of the most often utilized methods for screening investments.
Calculating the various returns described above could provide the same outcome in some cases. If an investment is made over just one year, the return on investment and the return rate will always be the same. These kinds of returns are expected from a project, but, it is significantly impacted by factors like time and, in particular, leverage. For instance, examining the deal-level return on investment with Investors may assess projects more fairly if a debt is taken out of the picture.
Whatever the case, the fact that It is possible to utilize a simple yet crucial word like “returns” to denote several things is still evident. In cases where you’re unsure, ask the sponsor to specify the kind of return they’re referring to and how their calculations were derived. Inquire what someone means since you are spending hard-earned money. The only foolish question is the one you don’t ask. There is no particular school of real estate development, everybody defines terminology based on their specific history and expertise.
Equity Multiple
The equity multiple is surprisingly straightforward, especially when contrasted with many of the sometimes murky real estate indicators. To determine the Divide the cumulative returns, which includes capital returns, by the total sum invested to calculate the equity multiple. The equity multiple is particularly well-liked by investors, developers, and other players in the real estate business since it is a straightforward ratio.
Even if the method is simple to understand, it’s crucial to comprehend what the “total cumulative returns” and what the “total amount invested” truly means. The resulting multiple will undoubtedly be inaccurate if your inputs are incorrect.
The total cumulative returns will require the inclusion of many factors. You must add up your continuing cash flow, your selling profit, and the overall ROI of your investment to get this number. If anything qualifies as a return in its direct form, it will be a part of this figure.
It is a little bit simpler to determine the total amount invested. Ask yourself how much money you invested in the transaction. Since the equity multiple does not account for time, if you invested in the agreement in numerous installments, these payments will be accounted for as if they were paid in one single sum. To know the equity multiple once you’ve determined the overall cumulative returns and the total amount invested.
Understanding the Equity Multiple
It would be beneficial to look at a particular example to comprehend the equity multiple better. Let’s say you put $100,000 into a deal; this is your entire investment and serves as the denominator for the equity multiple calculations. Let’s say that this investment generates $100,000 back in addition to $50,000 in rent (the “ongoing cash”), $150,000 in income from the ultimate sale, and $50,000 in rents (the “ongoing cash”).
In this case, $300,000 will be the sum of all cumulative returns (sum of rent, profit, and return of capital). Then get the equity multiple by dividing that $300,000 by the initial investment of $100,000, yielding a final equity multiple of 3X, using the formula listed below. In layman’s terms, your equity will increase three times after the final deal three times the equity looks like a terrific deal in the short term. However, if this transaction takes 50 years to complete, this might not be as appealing. In any case, it’s crucial to remember that taking time into account is necessary to determine if a predicted equity multiple is “good”.
Because they provide a common, understandable number that might influence your choices and have an impact on how a sponsor is compensated, equity multiples are helpful. Investors may demand that before the sponsor pays them, they receive a yearly return to assist hold sponsors “accountable” and guarantee that risk and reward are correctly aligned. Before the sponsor is paid, a specified equity multiple is promised, though, this formula is not typical.
Total Cumulative Returns (=cash disbursements + profit share + return of capital)
Total Amount Invested
Total Cumulative Returns (=cash disbursements + profit share + return of capital)
Total Amount Invested
The inclusion of the equity multiple will make it more likely that the investors would be compensated for their initial risk investment, even if the sponsor were to sell the property tomorrow. On the other hand, factoring in the yearly return will also make up for the investors’ unending commitment to cash. In this case, the investors are compensated regardless of what the sponsor does with the property, and the sponsor will likewise be free to make decisions that are in their best interests.
The finest syndication arrangement will entail both sides shielding themselves from the risk of the unknown and will also demand that all parties are well paid, which is yet another example of a recurring theme. However, there are many different ways to define what makes a purchase “fair,” employing the equity multiple can help provide a comprehensive picture.
Internal Rate of Return (IRR)
Naturally, while researching possible investments, investors need to know how much profit the property is expected to provide. It’s not an issue, is it? Sadly, the reality is a little more complicated than that. If someone said that the property was expected to “earn” $100,000, this claim would be worthless if other considerations weren’t considered.
When will I start receiving this money? How much money will you have to put down up front? Even if the $100,000 amount were true, it would be difficult to determine whether a trade is good or bad without knowing the answers to these questions. We utilize the measure Internal Rate of Return to contextualize a potential project’s earning potential and to simplify things to contrast various investment possibilities (IRR).
IRR is a terminology that many professionals in the field are familiar with from their business school days, but it is also one that is commonly abused and misinterpreted. The predicted annualized return on a multi-year investment is measured using the IRR, or internal rate of return. IRR and Return on Investment (ROI) vary primarily in that IRR considers future capital value. As a result, IRR is typically seen as a more thorough indicator for assessing long-term investments.
Choosing the Best IRR
Naturally, the next question you’ll probably have after you grasp IRR is: What is the perfect IRR for real estate investments?
Again, there is no one “correct” response to this query, so it must be contextualized. When all else is equal, a company will choose ventures with a higher IRR, but there are outside factors that might cloud this picture. It’s crucial to remember that all riskier investments include some level of risk. There is no assurance that a project’s anticipated IRR will reflect its actual results.
You must also consider the type of project you are working on as well as your level of risk tolerance. When purchasing a completed and inhabited office building, the expected IRR will be lower, but the amount of risk will also be lower. Construction projects frequently have higher IRRs than rehabilitation projects.
In the aforementioned cases, the lower-risk initiatives may have an IRR of roughly 8% while the higher-risk ventures could have an IRR of around 20%. Why wouldn’t an investor select the project with the IRR every time?
When you consider the exact return from an investment will be unknown until later, this question is comparable to inquiring why a stock trader wouldn’t just buy the stocks that would gain in value the most. While some will work well, others will unavoidably fail, not all ventures with a 20% projected IRR will attain these levels.
In contrast to the businesses pursuing agreements with lower expected returns, which are more inclined to try to select only winners, the 20 percent of deal-seeking enterprises are more willing to accept one loss for every three wins. Both approaches have advantages. Generally speaking, you should anticipate that any project that demands more labor will also be riskier. The decision will then be up to Which initiatives are worthwhile pursuing is up to you.
A Closer Look at IRR
The time worth of money, which should be considered when making financial decisions, may be accounted for by using the internal rate of return (IRR), which is a little trickier to calculate than the mean return generated each year.
We could immediately perform an “eyeball calculation” and estimate that the project generated a 50% return if a $100,000 investment produced $50,000 for 5 years. From there, we may say that 50% over 5 years is 10% every year.
However, rather than just expanding by 10% of the initial amount, an investment must increase by 10% annually to be generating 10% annually. In this case, $100,000 would need to generate $66,349 over five years, rather than $50,000.
In this scenario, an IRR of 8.45 percent would be obtained from an asset that only generated $50,000. While IRR and ROI are comparable, the modifications for a time provide investors with a more accurate knowledge of a property’s potential. When applied to the scale of a multimillion-dollar property portfolio, seemingly little alterations can have a significant impact.
Preferred Return
The relevant parties will need to decide how much money each party receives as the priority of the payments when there are numerous parties with a financial interest in a property, which commonly includes the bank. Essentially, the phrase “preferred return” refers to the main return on investment that investors experience. It is comparable to the interest banks pay on deposits, with the essential qualification that, but unlike a bank, neither the investment (deposit) nor the desired return (interest) in a real estate investment is guaranteed.
Preferred returns are payments made by the project from available operating cash flow, and they effectively reflect the investors’ portion of tenant rentals after all expenditures are covered. It is up to the project sponsor (the entity that funds the project) and the investor to agree on the preferred return’s size in percentage terms. Following the financial parameters established at the project’s outset, the developer) and investors.
What is referred to as a “waterfall” structure is used to determine preferred returns? The money from the sale will start to flow in a top-down manner, like a waterfall. Irrespective of the sale price, the bank will nearly always get payment first in a home mortgage scenario. The remaining earnings will then transfer to the property owner once the mortgage is discharged.
In the previous illustration, the investor’s position is the riskiest, while the bank’s position is the least hazardous. The investor will be responsible for these losses before the bank if the property is sold for less than what was originally paid. With lenders at the bottom and higher-risk investors at the top of the flowchart, capital stock is, in this sense, the waterfall’s antithesis.
Bringing Interests Together
Before engaging in any transactions, all parties should thoroughly grasp the preferred return, which may be structured in various ways. Alignment of interest is frequently used in the business world to describe the process of ensuring that both parties have a shared goal. A developer should ideally have a motivation to raise the property’s worth that is compatible with the investor’s best interests, according to the investor’s ideal scenario.
Investors are at lesser risk when there is a good alignment of interests since the developer has both a financial stake in the success of the project and a financial stake in its failure. The preferred return is typically set up so that the investor receives it after the developer has paid their fees but before they receive a cut of any profits. There are several scenarios wherein the risks will not be managed, which might be problematic. A developer will have nothing to lose and yet be able to make money, for instance, if they only receive fees for putting together the contract rather than investing any money themselves.
These transactions do happen, but they are by no means perfect. In an ideal scenario, each party involved—the investor and the developer—will have a financial stake in the agreement and the chance to earn more when the property performs well.
Preferred Return
As previously mentioned, a preferred return emerged as a logical answer to the requirement for interests to coincide. Effectively moving the needle to ensure that all parties involved have a decent balance of risk and reward is attainable by altering the sequence and amount each party receives payment. In many preferred return arrangements, especially institutional ones, the sponsor (developer) may be required to put up a modest amount of equity while investors may have access to a potential profit “floor” that can assist lower the risk of their investment.
Given that the JOBS Act was passed in 2012, it should come as no surprise that this sector offers a wide range of discounts. There are several things you should consider while evaluating different offers. Who receives the first payment? What can you expect to be paid? How would your estimated return alter in the event of a recession, new legislation, demand changes, and so on?
There isn’t a single capital structure that is best in all situations. The financial goals of all involved parties, as well as the abilities and money that are already on hand, will define the optimum structure for a particular agreement. One of the most prevalent models is where investors contribute 90% of the needed stock and the sponsor provides 10%. The investors will then receive their money back and 70% of the remaining earnings, with the sponsor receiving the remaining 30%. The investors would then earn a preferred return of 8%.
These statistics can be changed in a variety of ways. Risk and reward must continue to be balanced between developers and investors. Even if the investor must risk a larger sum of money, they get the advantage of getting paid first by using a preferred return.
Promote and Fees
In real estate syndications and a majority of other business partnerships, it will be critical to write a contract that encourages both parties to act in each other’s best interests. These agreements are intended to encourage sponsors to act in the interests of investors. This is pushed in many ways, one of which is a promotion—a monetary payment made to sponsors as an incentive to get them to meet specified expectations.
A promotion, in this context, is a noun rather than a verb, it is an arrangement that gives the sponsor a share of the “surplus” revenues. The bank typically receives payment first from the cash flows generated from a particular property, then the investors, who get their selected returns plus their initial investment back. If any profit remains after these obligations are fulfilled, it should be divided between the sponsor and the investors.
This can be arranged in a variety of ways. In the simplest of negotiations, the sponsor and investors divide the remaining earnings evenly, although these sorts of agreements are often only found among relatives or other extremely close-knit groups. An agreed-upon percentage is provided to the sponsor in a deal that employs a promotion, which is the most typical structure, and the remaining funds are among the investors.
The investors will almost always be entitled to a larger share of the earnings than the sponsor. Giving the sponsor 30% and the investor 70% of the proceeds is an example of an arrangement. When a promotion is present, it ensures that the sponsor has a financial incentive interest in the overall property performance.
Choosing Between Promotion and Fees
Although the investor and the sponsor have some common interests irrespective of the promotion, the presence of promotion might encourage the sponsor to perform above average. The sponsor will generally additionally charge fees to a project to cover costs while the project business plan is performed when a promotion is included in the deal structure since they are aware that they won’t get paid until after the investors and the bank were paid.
However, the fees mustn’t act as the sponsor’s primary motivation. If a sponsor charges exorbitant fees, there is a conflict of interest. For instance, if a sponsor says they would donate $500,000 to a project as their “co-investment,” but they also want a $500,000 acquisition fee, the initiative will not have received any real financial support from them.
While the promoter receives payment after the conclusion of the transaction, the fees are paid continuously during the project duration. These costs might be expressed as a flat rate or as a percentage of a line item and are often not connected to performance. Additionally, they could be offered at the going pricing on the market or the developer-specific cost. Numerous expenses, such as market-rate fees for brokerage, leasing, and construction, or developer-rate fees for acquisition, management, and financing, might be included in a given project. No matter how they are set up, each of these costs will need to be explained in advance.
Fees can significantly affect an investor’s projected and actual returns, as one might anticipate. No matter how much they cost, these fees will have a direct impact on your break-even point and overall return on investment.
In the end, choosing a suitable marketing and fee structure is all about striking a balance, as we can see from the evidence. A condition where risk is fairly compensated and both parties are interested in what you aim to achieve. The optimum situation will differ for each transaction, which is why industry knowledge and the ability to utilize your judgment will be critical.
Leverage
There are two ways to purchase a home in theory. The asset’s purchase price can be paid in cash. Alternatively, you may borrow money from a bank and utilize leverage (less money) to access even more capital and more assets.
The first option, an all-cash purchase, is less risky since, unlike a bank, no lender can confiscate your property if you fall behind on payments for a long enough time, but it is frequently a less efficient use of funds.
Even Warren Buffet and multibillion-dollar businesses employ leverage because it allows them to operate on a much greater scale and maximize the value of their capital. Even if you had all the funds, you could still discover that financing the home and putting the leftover funds into a source of additional income is a superior option.
To finance a property, borrowing money is known as leverage. Leverage, when used well, may increase a property’s profitability significantly. Even though using more leverage exposes the property owner to more risk, it also allows them to realize higher rewards. There is usually always a positive connection between risk and reward—the greater the risk, the greater the reward—even when the relationship is not linear.
A first position loan has the highest priority, a second position loan, mezzanine debt, and preferred equity may be used as layers of leverage. Preferred equity, however, referred to as “equity,” sometimes behaves like debt because it earns interest and doesn’t share in the profits.
The drawback of employing debt to increase the return on your equity and leverage your investments is that you might ultimately face foreclosure if you don’t make your payments to the principal lender. In fact, not making any extra payments may lead to a circumstance in which the lender may assert a claim on your interest in the property as collateral for their loan. Because of this, if you do decide to utilize debt, you must make sure that you don’t have so much debt that, in times of financial hardship, like, say, a recession, you won’t be able to service it, that is, make the required payments on time.
A Closer Look at Leverage
Understanding how leverage affects a project is crucial because, while it occasionally has a positive effect, too much leverage may also be detrimental. In theory, and as a minimum standard, employing debt will be to your best advantage financially as long as the interest rate of any loan you take is less than the unleveraged yield. Furthermore, the more leverage you take on, to a degree, the bigger the prospective rewards.
In an unlevered purchase, for instance, $1 million can buy you real estate worth $1 million. Your wealth will grow to $1.1 million after the contract is sold, assuming a 10% profit margin. By using 50% leverage, you might purchase a home worth $2 million, invest your initial $1 million, and maybe earn $200,000 in returns, doubling your entire profits to 20%.
You could obtain $4 million in property using $1 million of your funds and $3 million from a lender with 75 percent leverage, which offers even higher profit potential. With a 40% profit margin, the $4 million would provide a profit of $400,000 for every $1 million invested. Therefore, in principle, agreements with better leverage have higher potential profits; yet, if there is a downturn, you can find yourself paying the bank the remaining sum on any loans the real estate you bought is used as collateral.
Leverage is undesirable for the major rationale mentioned above. To pay off the enormous debt between 2007 and 2009, several commercial real estate businesses and investors suddenly ran out of money, sacrificing not just the cash they had contributed but also the funds they owed lenders on loans they had taken out. Due to this overleveraging, loan prices fell and there were more defaults, which nearly brought down the entire financial system. Additionally, it was very important in the overall real estate market’s collapse.
It would not be exaggerating to say that even a great deal with great sponsors might be a terrible idea if there is too much debt. All investments include some level of risk, which is why other important aspects are considered. One of the most important underwriting factors to think about is if you can take into account different lender types, major ratios like the loan to value, debt service coverage ratio, etc… And perform enough due diligence is finding the right leverage structure appropriate for each deal you are looking.
You will go in-depth on fundamental financial concepts during the 8 Financial Keys program. Financial theories employed by every developer, throughout every real estate regardless of the development style used, or estate type This course will teach you:
- Essential financial ideas for each contract and pitch deck.
- Concerning any conflicts of interest between you and the sponsor.
- How much money you will (in reality) make from a contract.
- Which factors should you pay the most attention to?
- Easy to use detailed spreadsheet modeling.
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Come join us! Email me at mark@dolphinpi.us to find out more about our next real estate investment.