EPISODE 009:
Part 2 of 2: Residential & Commercial Property Values & How to Change Them

Categories:
Strategy & Tips
Description & Show Notes:
In this episode, we focus on Commercial Properties: how they are valued and 3 ways to increase their value as an owner.  We look at the ways that the Net Operating Income (NOI) and Cap Rates work together to determine the value of a Commercial Property, and easy ways that  you as an owner can improve both of them to have a major impact on the value of your property in just 2-3 years.  There is a simple recipe for success in this part of the Real Estate Investing world, and I'll introduce it here.

The 2 Components of Commercial Property Valuations:
  • Net Operating Income (NOI):
    • Take all the income and subtract out all the costs associated with running the property.  (usually everything but your loan payment)
    • This number is a FACT.
  • Cap Rate:
    • The desired return a new buyer would want (or need) to get if they are buying a property
    • This is an OPINION.

The Value of a Commercial Property is found like this:
  • NOI / Cap Rate = Value
  • $100,000 per year / 8% return = $1,250,000
  • 100,000 / .08 = 1,250,000

Commercial Property Quick Tips:
  • Renovating the Management is easier & cheaper than renovating the "property" itself
  • Give yourself 2-3 years to implement your plan on an apartment turnaround and longer for retail or office spaces  


Links from this episode:
Hosted by:
Chris Kearns
- Investor, Broker
- 2x Auburn Grad
Sponsored By:
Auburn Investment Properties  | 852 N. Dean Road, Suite 100, Auburn, AL 36830
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