Tag Archives: Commercial Real Estate

Return Metrics for Commercial Real Estate Investing

When looking at a commercial real estate investment, a common question when trying to value a property is “What return metric do I need to use?” Common metrics include, Cap Rate, Cash on Cash and IRR. These metrics approximate a yearly percentage return you’ll receive on your property investment. Which return metric is best for your particular property? Let’s first look at how each metric is calculated.

The cap rate is a very common real estate industry term that is calculated by dividing your property’s net operating income by your property’s purchase price. An example of a cap rate would be if you acquired a new property for one million dollars which had a first year net operating income of one hundred thousand dollars. In that case your cap rate would be ten percent and you would say that you just bought the property at a ten cap. Cap rates are also used to approximate the purchase price of your property. Riskier properties are riskier investments and thus require higher returns. This means a riskier property would require a higher cap rate from an investor. A safer property can be purchased at a lower cap.

Cash on cash is another industry term that is calculated by dividing the investor’s cash flow of a property during an operating year with the amount of cash the investor has invested. So, if an investor offered a hundred thousand dollars of equity to get a building and they received eight thousand dollars in income after all expenses and debt service during a certain operating year, then the investor’s cash on cash return in that operating year was eight percent. Another derivative of cash on cash is called cash on cost. Instead of the cash investment to purchase an income producing building, this metric uses the total cost for building or renovating a building along with the associated cash flows that the investment will generate.

IRR is a general finance term that is commonly used in commercial real estate. IRR stands for internal rate of return and is calculated by using all the cash flows an investor will make (positive and negative) over the course of the investment period. IRR represents the average annual yield the investor will realize over that time period.

Why should certain return metrics be used over others? Cap rates are generally found when analyzing purchasing and sale of properties. They only consider the transaction event in that specific interval and don’t look at the entire string of cash flows. Cap rates are the best way to have a quick judge of that particular property and how it is being valued. Cash on cash looks at the individual cash flow periods and does not include appreciation from the asset upon sale. IRR compares the entire string of cash flow to and from the investor and it is a much more exact approach to valuing a property investment.

For more advice on creating real estate pro formas and excel templates, please see the Pro Forma GURU: Guide for Real Estate Investing at www.ProFormaGURU.com

Has Anyone Used Austin Davis’s Program? Here’s My Experience.

Last year I was introduced to Austin Davis. I was told about Austin from another investor I follow. The teacher whose program I had bought I found very useful so I bought Austin Davis’s program. First, unlike the program I had already bought on apartment investing thi s program was just for funding. If you are a new investor you may want to start with a overview program or book on apartment investing. The one I started with was by Monica Main and I got it for less than $100 online. Since Austin was offering a 60 day money back guarantee I decided to give it a try.

The website he has is to the point and easy to use. Once I ordered I was able to download the program right away. The cost was $999 and I got 60 days to try it out risk free. Now that Austin has become so famous you can get his program for 50% off fairly easy. He was up front about wanting to find students to bring him deals and does encourage students to send him deals in his property scout program. You are not required to send him deals for his property scout program though. I was set on buying my own apartment and wanted no partners.

After I read through his program I sent his staff a email for help. I got help on how to submit a deal using the forms each week from his staff. I got a year of support included for free when I bought his program which was really nice. I just include my name and email and date I ordered to get the free support. I had to work up 9 deals before the numbers finally worked, but with $3,200 a month in cashflow it was well worth it. I was able to buy with nothing down thanks to his investor fund. I have never been able to qualify for a grant of any kind as I am not in any special group or class so getting the down payment fund to help me was a major bonus.

It took me 7 months to get my first apartment, but I bought it with no down payment and only $12,000 cash up front. Austins team did show me how to get the prefunding for up front costs too. I got a seller credit at closing to cover my closing costs and got cash to pay the up front costs back too. I just wish I could get cash back at closing from my first deal, but I did not know how to do it then. I did learn how to get cash on a deal back from the investor fund.

My free 12 months of support has since expired. His mastermind group is $99 a month and great for continued support. I am working on my 3rd apartment now and still use Austin’s staff to help me on my deals.

Before I started with Austin’s team I tried dozens of other real estate programs. I spent a lot of money on other gurus stuff.

What has set Austin’s program and his team apart from the other programs is the support. I also am impressed to see Austin now offering his program for $500 or less. Austin offers the 60 day guarantee now on his program too. I always pay for a program using my credit card for protection. What I love about being able to buy with a credit card is I also got the protection of my credit card. If a merchant does not refund my money when they offer a refund guarantee I can always dispute it with my credit card to get the money back. Austin also went the extra mile to have his program billing handled by a independent third party called Clickbank. I have found few teachers go to the length of using a 3rd party to audit and protect customer billing information any more. Clickbank is the internet’s largest and most respected internet billing provider. What I do know is that Clickbank is high on security and has a iron clad refund policy all merchants have to follow. Just google clickbank to read about the awards for security they have in place.

I would like to take the time to thank Austin in my review for all his help. I could not find any reviews a year ago when I looked for Austins program reviews. I have noticed a lot of people asking for reviews so I wanted to share this.

There are many scams online today. Always look for a program with a money back guarantee. You also want to pay with a credit card or paypal. Look for a 3rd party billing servicer such as clickbank or authorize.net or something like that to protect your billing infomation. Clickbank is one of the largest.

For real estate you need someone with support. This is big. What you must have is a good team to support you on doing your deals. The price of a program does not equal value or worth. I think the big $10,000 and $20,000 bootcamps are a joke. Just think about that for a minute. If an investor is profiting from deals why do they want to charge $5,000 or more? Why even charge a grand?? I asked Austin this and I think that is why he has dropped the price to $500 or less. It just makes since more people will be able to buy your program if it costs less. I wish it was free. I do understand though you have to charge something to help people and provide good support.

I was troubled by the lack of clear reviews and feedback from people online about Austins program. How will you know if this really works? Try it is what I say to do since then you can see how it works first hand and if it doesn’t ask for your money back. Just use your credit or debit card and keep a copy printed of the website guarantee for your records. I was told if it did not work for me to ask for a refund from the start which was reassuring to me. I got help on my order from clickbank too. Clickbank also sends you a order confirmation email with a easy click refund request for your protection. If you are skeptical – you have the printed copy of the guarantee and can call your credit card company and they will refund it. The point is you can try it and see for yourself.

I only wish someone would have wrote a review like this for me when I was skeptical. I really wish someone pointed me in the right direction of who try try so I would have saved the $10,000 I spent on other programs before Austin. Being able to finally live the life with freedom I have worked so hard for in the last 12 years has been such a blessing. I have time to spend with my kids. I have time to travel now. In this day in age that’s a valuable thing. I wish you well in your investing and your dreams.

Monica Main Vs David Lindahl

For a long time now I have followed Monica and David. They both teach apartment complex investing methods. Recently I discovered that David Lindahl filed a lawsuit against Monica Main. I could not get access to the file with details. There must be some kind of copy right issue from what I can tell. David Lindahl has a free seminar that really motivates people. The seminar though is a sales pitch for a bootcamp costing several thousand dollars. For more info check out the Monica Main Review on squidoo. David charges 10-80 times more for his program than Monica which is a big difference for me.

Monica’s bootcamps are priced much lower. I am planning to attend Monica’s bootcamp in the next year. I have long wanted to buy apartment buildings. The cash from property in apartments is much larger.

I would like to know more about this lawsuit between RE Mentor and Monica Main. David’s company is called REMentor. I have seen both programs and they were both pretty good. Monica claims her program is up to date. I have got multiple updates for free of Monica’s program. Monica has kept her price super low.

The multifamily property is what I am most interested in. Having many renters to spread the risk of income is the best way. Monica has alot of books in the works. The old stocks trading issues cause problems for Monica. Main finally got out of stocks and options after trouble with the government. Monica is in apartments now and real estate. The safer income is in apartment buildings I think.

I would like to expand into office buildings one day. Monica has programs for all property types which is really nice. The program Monica has for real estate investing was a good value too. I finally did start my investing career which has been good.