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Archive for the ‘Investment Insider’ Category

That’s Why I Prefer Real Estate Investments!

Wednesday, May 19th, 2010
Investing in Real estate just makes more sense!The following article is emblematic of the reasons I feel that real estate should be a key component of any long term net worth building program.  Don’t get me wrong…it’s OK to put part of your money on Mr. Hare…I just think you should put most of it on Mr. Tortoise. -Rick M. Bean

From: Pittsburgh Business Times – by Patty Tascarella

 The Securities and Exchange Commission announced Tuesday that stock-by-stock circuit breaker proposals are being filed in response to the market disruption of May 6.

Stocks lost $1 Trillion in a half an hour?  That’s why I’m in real estate investing!  They’re proposing to limit losses to 10% in a 5-minute period.  Ouch!  To employ your wealth building strategy on a local level, contact us at Rose City Commercial Real Estate.  503.577.1034 or rick@rosecitycre.com

The national securities exchanges and the Financial Industry Regulatory Authority are filing proposed rules under which they would pause trading in certain individual stocks if the price moves 10 percent or more in a five-minute period.

The SEC is currently seeking comment on the proposal, which would take effect as a pilot program running through Dec. 10, 2010.

The fastest, abruptest market slide in Wall Street history plunged the Dow Jones Industrial Average a fraction short of a 1,000-point drop on May 6. The exchange regrouped just as quickly to a 347.80 point loss by the end of trading.

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It came down to an error stemming from a lack of communication between the six exchanges operating in the United States — The New York (more…)

After a Stagnant 2009, Some Retail Chains Begin to Expand

Wednesday, April 14th, 2010
Portland Real Estate is recovering!

Yet another sign the economy is recovering

Even though this investment news doesn’t directly impact Portland multifamily real estate I’ve included it because it speaks to the general improvement beginning in the overall economy.  I’ve personally seen a huge surge in interest in Vancouver apartments in the last month.  

 From: Retail Traffic Apr 13, 2010 10:59 AM  

Bed, Bath & Beyond’s announcement last weekthat it plans to open 60 new stores in fiscal 2010 highlighted a change in attitude that’s slowly taking place among national retail chains. While most national retailers spent 2009 trying not to drown, a brighter outlook for U.S. economy and better pricing on available space has led to an increase in expansion announcements in 2010.   

Meanwhile, children’s apparel seller Gymboree has doubled the number of stores planned for its new off-shoot Crazy 8 up to 100 from previously announced 50. And Urban Outfitters Inc. decided to launch a new concept next year that will focus on the always popular bridal market.  This year, leasing activity might rise 5 percent year-over-year, according to some experts. But the growth will be concentrated among a few key sectors, including discount stores, furniture sellers and fast-food operators.  (more…)

Basic Investment

Thursday, March 25th, 2010

As there is a mix of investment sophistication  levels on this site I have opted to interject a review of the basics.  For you institutional investors…hang on we’ll have some information that we think you’ll find valuable in…later posts. 

 Below is a brief overview of NOI, CAP Rate, and NOI, CAP, and NOI Multiplier.

What is NOI?: Net Operating income

What does it measure?: Measures the revenue generating capacity from operations.

When is it important?: Two times: When you is sellin’…and when you aint. On a more serious note, NOI is the source of payment for debt service, and cash flow distributions to the owners.

Why it’s important:  It provides a way to measure the revenue producing capabilities of an asset excluding debt service considerations.

What’s the formula?: Current Revenue – Current Expenses (Exclude debt service, capital expenses.)

Example: Current Revenue, June 2009: $100,000.
Current Expenses, June 2009: $ 35,000.
NOI, June 2009 $65,000.

What is a Cap Rate?

The capitalization rate is what the yield as a percentage of the initial investment would be in year one if you acquired the property all cash.

Why it is important: First “sniff test” investors use to check out an available commercial property.

What is the formula? NOI/Sale Price = Cap Rate
Example: $65,000/$812,500= 8%.

What is NOI Multiplier?

How much each dollar of NOI would contribute to value if property was for sale.

Why we care: Knowing how much each dollar on NOI is worth helps us evaluate the impact of incremental increases in revenue and expense. (Great for rehab/repositioning!)

What’s the formula? Sale Price/NOI = NOI Multiplier
Example: $812,500/$65,000= 12.50 (Each dollar of NOI creates $12.50 of value.)

NOI, CAP, and NOI Multiplier Problems

A Portland Multifamily investment Property X had the following revenues in 2008:
• Rent $122,500.
• Extraordinary gain: harvest lumber on property $25,000.
• Pet rent $300.

Property X had the paid the following in 2008:
• Utilities, taxes, management fees, etc. $48,000.
• Cap Ex: Completely rebuild lower parking lot $19,000.
• Re-stripe upper parking lot $125.

QUESTIONS 1 & 2 are based on the information above.

1. What was NOI?    ANSWER:  $74,675  Note: The lumber revenue and parking lot expense were not operating related and were thus excluded from NOI.

2. What is the asset worth if we assume a 6.9 Cap% ?   ANSWER: $74,675 / .069 =  $1,082,246

QUESTIONS 3 – 4 are based on repositioning an 18 unit property we are buying for $1,200,000 at an 8 cap with a 5.9 % loan. Current Annual NOI is $96,000:

3. How much is each dollar of NOI worth? ANSWER: $1,200,000/$96,000 = $12.50.

4. How much more would the property be worth if we could raise the rents in 10 of the units $10/month? (Assume that a year has 12 months, all the units are increased at the same time for the full year…and that we could do this without increasing expenses…without any change in turnover.)  Answer: 10 units X $10 X 12 months equals a $1,200 increase in Annual NOI. Multiply by $12.50 = $15,000 increase in value!

Whether you’re a seasoned pro or a newbie…feel free to contact us:  503.577.1034 or rick@rosecitycre.com.

These equations apply whether your looking at Portland OR investments…or anywhere else too!

Property Tax Savings


Let Prime Property Tax Negotiation be your advocate. We’ll fight on your behalf to reduce your property taxes and charge you no up front fees.

We found a $156,000 overpayment of taxes on a property we recently reviewed…how much can we save you?

Start saving today, call or email us at:

503.577.1034
info@primeptn.com
www.primeptn.com

Affiliations

Rose City Commercial Real Estate is proud to be affiliated with both Lackman Commercial and Keller Williams Commercial . The Lackman Group has created something truly special. They have installed technology solutions to permit cross office brokerage teams to tackle problems with in house experts. There is a higher degree of vertical integration than seen in even the national firms. I act as a multifamily specialist, while Robert Poe is the anchor for distressed properties and ministorage opportunities. We work with other specialist to create amazing synergy. With it's national network Lackman Commercial offers unmatched depth and breadth of service.
Charles A. "Mac" McClure, turned over the reins as President of CCIM...to become a KW Commercial Broker. When the leader of the most trusted organization in Real Estate joins your group, everyone's spirits are lifted. Like Lackman, KW Commercial is an organization on the way up!

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