Regardless of what we often have in our business it is always wise to search for what you think will be a big help in your investment. So with that being said let us try to focus on real estate investing. Well there are many types of real estate investing and one of them is Commercial real estate. Well, from that alone we can figure out what types of investment we vaguely want to happen. First there are these known things to consider in its market alone, it is not just a simple thing to know but rather a different one. Securing Miami commercial real estate loan at favorable terms requires some careful work on your part. If you've consulted a good mortgage loan calculator, and figured out what you can swing, there's still the whole application process to take on, first. Applying for small business loans should be done with a careful and well-researched approach. Miami commercial real estate demands high numbers at times and is often noted as another type of situation in the market.
Applying for Miami commercial real estate loans, well it is always figured out that its own market can be treated as a good investment prime at times, so there are several factors in which we should be able to know when we try to apply for a Miami commercial real estate loan. When you want to apply for a Miami real estate loan, you have two choices. You can go to the office of a lender and fill out a questionnaire about your finances. Or, you can visit an Internet-based broker and fill out an online form, which will gain you results far more quickly. The more things you try to embark the market with some strategies that you think would help you a lot, the more times, you’ll have a chance on having a good market value. Be aware that in Miami commercial real estate the value of it can also be measured with the knowledge of the term.
Sometimes there are these pointers that we should consider especially in the market which shows nice potential in Miami real estate. You should always know how to cooperate when asking a loan and one of its terms is filling out these application forms doesn't have to be a trial. You should, of course, strive to convey your financial information as accurately as possible. However, an online form is relatively simple to complete. You have to b honest and accurate on the things that you will pit in these forms because often times than nothing you’ll be able to at least be updated on those kinds of things. Let us be sure that thinking forward the things that you will put in the forms will reflect to you as well.
You should know that when you apply for Miami commercial real estate loans, expect to be asked the following questions. They will want to know all of the details regarding your business finances. You will be asked about your current mortgage payments, including your balance, terms, and so on. You should also be prepared to answer questions about the purpose of your new loan, the amount, etc. The given value for the market can be either good or bad, so you have to at least know the newest update to it. Because if you are aiming to get value on you Miami commercial real estate loan you should always know better.
Saturday, September 20, 2008
Net Operating Income And Real Estate Analysis
Net operating income (NOI) represents a rental property's potential income after all vacancy and operating expenses have been subtracted. As a result, because net operating income represents the investment property's productivity, or measure of cash flow, it's one of the most important calculations made in real estate investing.
To help plant the idea, consider net operating income in one of the following two ways, depending on whether or not a mortgage exists.
The investor pays all cash for the property. In this case, since the investment property has no debt, NOI virtually becomes the rate of return expected from a property for any given annual period before taxes and depreciation are considered. In other words, given no deduction for debt service (loan payment), you can regard net operating income as the annual cash flow (cash flow before taxes, or CFBT).
The investor finances the property. Here, since the property has a mortgage, NOI should be regarded as the anticipated amount of cash flow available to pay the mortgage. In this case, subsequently only the remainder of NOI (after subtracting for annual loan payment) becomes the annual cash flow before taxes.
How to Calculate Gross Scheduled Income Less Vacancy and Credit Loss = Gross Operating Income Less Operating Expenses* = Net Operating Income
Example: Assume that you want to do an analysis on an income property that generates a GOI of $100,000 with Operating Expenses of $42,000. What is the NOI?
$100,000 Less $42,000 = $58,000
*Mortgage payments, depreciation, and capital expenditures are not considered operating expenses and therefore have no impact on net operating income.
It's Role in Real Estate Investing
Net operating income plays a large role in a variety of real estate investment and holding period decisions. For instance, capitalization rate (cap rate) is calculated by dividing NOI by sale price. Likewise, property value (or the property's sale price) is calculated by dividing NOI by the cap rate.
Example: Let's continue to assume a net operating income of $58,000 (as in our example above) and a sale price of $580,000. What is the property's capitalization rate?
Net Operating Income Divided by Sale Price = Cap Rate
$58,000 Divided by $580,000 = 10.0%
Okay, now let's assume an NOI of $58,000 of and a cap rate of 8.0%. What is the property value?
Net Operating Income Divided by Cap Rate = Property Value
$58,000 Divided by 10.0% = $580,000
Net operating income also plays a large role with lenders. For example, Debt Coverage Ratio (DCR) is calculated by dividing the net operating income by loan payment.
Net Operating Income Divided by Annual Loan Payment = Debt Coverage Ratio
$58,000 Divided by $46,000 = 1.26
How Credible Is It?
Conceptually, NOI is important because of its use in numerous calculations surrounding property performance. Because it's used to estimate property value and cap rate, as well as useful to lenders, NOI has become an essential component of real estate investment analysis. As a real estate investor, therefore, you should understand net operating income, and recognize what it means to your potential investment valuation.
But be careful.
Remember, NOI is not unlike other calculations typically used for real estate investing purposes. The result is only as good as the numbers are credible, and numbers can be manipulated. Sellers have sometimes been known to become very creative in order to make the relationship between the price and NOI to come out right.
So here's a tip. When a property appears to have a favorable NOI and in turn positive rates of return, don't simply accept the numbers. Spend the time to validate the numbers. Reconstruct the owner's representations for income and operating expenses if necessary, and compute your own NOI. Whatever you do, rely on nothing less then the most credible net operating income possible. You can't afford not to.
To help plant the idea, consider net operating income in one of the following two ways, depending on whether or not a mortgage exists.
The investor pays all cash for the property. In this case, since the investment property has no debt, NOI virtually becomes the rate of return expected from a property for any given annual period before taxes and depreciation are considered. In other words, given no deduction for debt service (loan payment), you can regard net operating income as the annual cash flow (cash flow before taxes, or CFBT).
The investor finances the property. Here, since the property has a mortgage, NOI should be regarded as the anticipated amount of cash flow available to pay the mortgage. In this case, subsequently only the remainder of NOI (after subtracting for annual loan payment) becomes the annual cash flow before taxes.
How to Calculate Gross Scheduled Income Less Vacancy and Credit Loss = Gross Operating Income Less Operating Expenses* = Net Operating Income
Example: Assume that you want to do an analysis on an income property that generates a GOI of $100,000 with Operating Expenses of $42,000. What is the NOI?
$100,000 Less $42,000 = $58,000
*Mortgage payments, depreciation, and capital expenditures are not considered operating expenses and therefore have no impact on net operating income.
It's Role in Real Estate Investing
Net operating income plays a large role in a variety of real estate investment and holding period decisions. For instance, capitalization rate (cap rate) is calculated by dividing NOI by sale price. Likewise, property value (or the property's sale price) is calculated by dividing NOI by the cap rate.
Example: Let's continue to assume a net operating income of $58,000 (as in our example above) and a sale price of $580,000. What is the property's capitalization rate?
Net Operating Income Divided by Sale Price = Cap Rate
$58,000 Divided by $580,000 = 10.0%
Okay, now let's assume an NOI of $58,000 of and a cap rate of 8.0%. What is the property value?
Net Operating Income Divided by Cap Rate = Property Value
$58,000 Divided by 10.0% = $580,000
Net operating income also plays a large role with lenders. For example, Debt Coverage Ratio (DCR) is calculated by dividing the net operating income by loan payment.
Net Operating Income Divided by Annual Loan Payment = Debt Coverage Ratio
$58,000 Divided by $46,000 = 1.26
How Credible Is It?
Conceptually, NOI is important because of its use in numerous calculations surrounding property performance. Because it's used to estimate property value and cap rate, as well as useful to lenders, NOI has become an essential component of real estate investment analysis. As a real estate investor, therefore, you should understand net operating income, and recognize what it means to your potential investment valuation.
But be careful.
Remember, NOI is not unlike other calculations typically used for real estate investing purposes. The result is only as good as the numbers are credible, and numbers can be manipulated. Sellers have sometimes been known to become very creative in order to make the relationship between the price and NOI to come out right.
So here's a tip. When a property appears to have a favorable NOI and in turn positive rates of return, don't simply accept the numbers. Spend the time to validate the numbers. Reconstruct the owner's representations for income and operating expenses if necessary, and compute your own NOI. Whatever you do, rely on nothing less then the most credible net operating income possible. You can't afford not to.
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