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How to Prepare a Meaningful Real Estate Analysis

June 24, 2009

Preparing an analysis of an investment property to determine whether an investment will be good for you is paramount to successful real estate investing. Of course, a real estate analysis is only as good as the information you collect so it offers little meaning to your investment goals unless the analysis contains valid data.

In this article, we’ll discuss the information you must collect for a real estate analysis along with some nuances inherent in each that should be considered to insure that the data is valid.

Purchase Price

Okay, you found a rental property that that you like but now must decide how the investment property looks financially regardless of what the seller tells you.

The seller wants $500,000, convinced that he is practically “giving” his property away because the ten-unit building down the street sold last year for $530,000 and his property is much more attractive plus it has the lowest rents in the area (suggesting you can increase the rents and therein your gross income).

In other words, he likes his property and justifies his price. Therefore, it’s up to you to determine whether the property is priced right or not based on your own survey.

Present Loans

What loans are in place that might be assumed and will the seller consider carrying a second mortgage.

Number of Units, Unit Mix

How many units does the building have and what is the unit mix or configuration. How do those configurations stack up with tenant demand?

Rental Income

How much annual rental income and what vacancy rate is the seller reporting? Any rental income claiming zero vacancy is not realistic and must include some allowance for vacancies. Examine a current rent roll and pay particular attention to when the rents were last increased and whether they are realistic according to your own rent survey. Owners sometimes raise rents up to or beyond the market prior to selling the property, in turn passing on a bunch of disgruntled tenants that might shortly move out. Likewise, look for a potential to raise rents.

Property Taxes

Ask the seller to produce a current tax bill or call the county tax collector’s office and request that information. Moreover, make an estimation of the property taxes you might pay if you purchase the rental property. In California, for instance, property taxes become one percent of the selling price and could be a great deal more than what the seller has been paying.

Insurance

Request a copy of the insurance policy and make certain that the coverage is adequate for you; it may be outdated, and perhaps well below the current value of the improvements. To be safe, obtain a new bid.

Utilities and Trash

Ask the seller to verify what he has been paying for electricity, water and sewer, gas (if applicable), and trash pick up for the past two or three years.

Repairs and Maintenance

Even after the owner produces his figures, estimate your own repairs and maintenance costs because the owner might have done all or a portion of his own repairs and maintenance or maybe was given a discount that you might not get. In most cases, six to eight percent of the gross operating income is sufficient.

Grounds Maintenance, Advertising, Pest Control

What has the owner been paying to keep the grounds maintained, perhaps a pool maintained, and for advertising? Are there any ongoing costs for a pest control service?

Property Management

One of the more important questions you need to answer is “just how involved do I want to become in the operations of my real estate investment?” Will you manage the property yourself, perhaps in combination with an onsite manager, or are you going to pay a professional management company to manage the property for you?

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Okay, with all those considerations in mind open up your real estate investment software and get started. It will be easy because the forms, calculations, and reports are provided.

Filed Under: analysis

Commercial Real Estate Changes – Way to Save Money

June 21, 2009

by Andrew Stratton

In today’s time of economic turmoil, business owners must begin to reexamine every aspect of their business. Savvy business people are going over their inventory and staffing needs, making cuts where they can and reinvesting their limited funds wisely.

However, for many business owners, the one expense they tend to overlook may in fact be the expense that could be costing them the most money: real estate. If your current piece of commercial real estate is not servicing your needs, it may be time to look into purchasing a new property for your business.

There are a number of practical considerations to make when deciding if you should purchase a new piece of commercial real estate. While cost is a primary consideration, it cannot be the only consideration.

While some property may have a seemingly high purchase price, the benefits of the property in the long term may more than make up for the initial cost. The first step in this process is to weigh your current piece of commercial land against the benefits and costs of choosing a different piece of property.

For instance, the location of your commercial real estate could be in a high traffic area. This can come in handy when considering your advertising budget, since a sign on the building can essentially create a free, ongoing billboard advertising your business.

This kind of free advertising can be invaluable as time goes by for any sort of local business. You may also look for commercial property next to existing businesses with similar customers. This could be a great way to work with your neighbors to create a one stop shopping experience. That sort of foot traffic and the potential for window shopping could be just as valuable as a billboard or newspaper advertisement.

Next, you should consider the actual structure you are currently in and compare that to other locations in your area. Today, many pieces of real estate offer built in Internet lines, which may be a huge upgrade from your current location. Furthermore, modern buildings may offer ‘green’, energy efficient designs that will save you money as time goes by.

Finally, it may be time to judge how your current piece of real estate helps you in regards to efficiency. Does your current space fit your needs while leaving you room to grow in the future? Can your workers perform to the fullest in your current space?

An improperly designed commercial space can lead to an inefficient business. If your business relies heavily on shipping, it may help your overall business to find a piece or property closer to major shipping centers and traffic routes.

If you decide that your current piece of real estate is costing you and your business money, you should definitely consider finding a new home for you business. The first step is to find an experienced commercial real estate agent in your area. They will be able to help you gauge your needs and find property that will help your bottom line.

Baton Rouge real estate offers great places for investing. It is booming as it has a thriving economy, interesting history and tons of places to eat drink and be merry. Visit http://www.realestatelouisiana.com to explore your options.

Filed Under: articles

Adding Pictures to Your Real Estate Analysis has Never Been Easier!

June 15, 2009

ProAPOD recently released an update to its platinum grade V.10.0 real estate investment software with sweeping changes in the way the software solution handles pictures.

ProAPOD’s real estate software solutions have always provided an excellent picture function that enables users to insert a picture on the coversheet and marketing package of the real estate analysis with one-click. It has been one of the hallmark features of all three software solutions, i.e., ProAPOD 4.0, ProAPOD 6.0, and ProAPOD 10.0.

The recent update to ProAPOD 10.0, however, takes it one giant leap forward.

Reports in 10.0 that Now Enable a Picture

  1. Cover Sheet – A coversheet is page one on your real estate analysis and as such introduces the investment property to the customer, partner, colleague, or lender whom you are presenting the rental property. A picture is currently enabled.
  2. Marketing Package – This is the report that highlights the property enough on one page so readers can quickly determine whether the property might be of interest and worth pursuing. A picture is currently enabled.
  3. Executive Summary – This report provides more detail about the property typically not included in the marketing package’s general overview of the property such as the property’s construction, utilities, area, and highlighted features for example. A picture is now enabled in this update.
  4. Photo Page – This report allows you to show additional exterior and/or interior pictures of the property. This page and picture function is now included in this update.
  5. Comparable Sales – This report enables you to compare the subject investment property to similar income properties that recently sold. A picture of each comparable sale is now enabled in this update.

If ProAPOD 10.0 is currently the real estate investment software you are using, be sure to update this latest version to take advantage of the newest picture functions. Preview all these reports at http://www.proapod.com/ReportsPage.htm

Filed Under: software insights Tagged With:
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