A Tool to Quickly Analyze a Property

A Tool to Quickly Analyze a Property

I thought I would share my proforma spreadsheet for analyzing commercial properties.  This is a basic tool, but it’s one I use frequently. You can get the spreadsheet by subscribing to my newsletter.

There are some incredibly in-depth tools out there for analyzing commercial properties.  The spreadsheet that’s given as part of the CCIM 101 course is incredible.  It’s able to forecast 10-years down the road, but it is so detail heavy that it can make your eyes cross, your hands sweat, and truly wonder if commercial real estate is anything you want to get involved in. Please understand that I’m not making light of a tool of that magnitude.  In fact, I will use it when analyzing million-dollar shopping centers.

However, there are times when I just want to quickly analyze a property to understand if it is worth digging into deeper.  That’s where this little proforma comes in.  It isn’t mean to be an end-all/be-all.  It’s just a starting point.

The spreadsheet was given to me by my investing partner who said I was free to tweak it and share it.

Without further ado, let’s take a quick walk-through.

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Tools of the Rich #1 – Depreciation

Tools of the Rich #1 – Depreciation

An October 13th, 2018 article in the New York Times discussed how Jared Kushner avoided paying almost no federal income taxes several years running. According to the article, Kushner, who has a net worth of $324M plus, paid little to no taxes from 2009 through 2016.  Just by my first two sentences, you can see the slant of the article – how things are tilted unfairly toward the rich.

To avoid paying taxes, the article pointed out that Kushner used “depreciation, a tax benefit that lets real estate investors deduct a portion of the cost of their buildings from their taxable income every year.”

Before we get too far into this post, let me state one thing – I didn’t vote for the current president nor do I like how he’s running the White House.  That will be the most political I say on this blog as I’ve tried to be very apolitical.  However, I’m going to defend Mr. Kushner’s use of depreciation throughout this post and I don’t want anyone to believe I’m doing so for political reasons.  I’m doing it strictly because it’s the right thing to do.

As we get started, let me be clear.  The depreciation “tool” is available for every real estate investor, but you must get in the game to use it.  Otherwise, you’ll just be standing on the sidelines, wondering how come there are others running up and down the field.

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What are the Poor Four?  And are They Keeping You from Being Wealthy?

What are the Poor Four?  And are They Keeping You from Being Wealthy?

I read the most astounding paragraph in the June 19th, 2018 edition of USA Today.  In Wealth of Millionaires Surges 10.6% to top $70 Trillion for the First Time, David Carrig was reporting on the World Wealth Report 2018 recently released from global consulting firm Capgemini.  It was the third paragraph of the article that really caught my attention,

The number of high net worth individuals (HNWI) – which Capgemini defines as those having investable assets of $1 million or more excluding primary residence, collectibles, consumables and consumer durables – grew almost 10 percent, or 1.6 million to 18.1 million in 2017.

After reading the title of the article, I wondered if this was supposed to be a shocking paragraph?  Was it something to get the readership wound up enough to raise their collective fist in anger and yell, “Life’s unfair?”

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The Investment Property Process

The Investment Property Process

If you’re looking to purchase an investment property, whether it be a residential single-family home or a commercial building, the purchasing process is very similar.  While there are some differences between the two processes, I thought they are close enough that I thought we should take a quick run through to get a discussion in place for future articles.

For discussion purposes, residential properties are single family homes, duplexes, triplexes, and quadplexes.  Commercial properties encompass everything else including retail, office and industrial buildings as well as multi-family projects of five units or more.

The investment purchase process for both residential and commercial properties looks like this:

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Investing is Risky. So is Life. Get over it.

Investing is Risky.  So is Life.  Get over it.

We spend our lives with risk.

There is everyday risk like driving to and from work, school, or some event with our spouse.  At any moment, we put ourselves on the road with other people who may or may not be in full control of themselves whether it be from alcohol, lack of sleep, or relationship induced stress.  Some of these people are just plain morons who should not be allowed to drive - but they're given a license anyway and we willingly chose to get on the road with them.

A collision could cost us financially from as little as a few hundred dollars to fix a ding to hundreds of thousands of dollars in medical bills.  However, we’ve learned to accept and manage this daily risk as we go about our lives.

There’s also the health risk we must accept just being part of the human experience.  Genetic health issues may cause elevated concerns throughout our life or they may show up in later years.  Poor food choices or bad exercise habits may not elevate our risk immediately, but sustained patterns will eventually result in some sort of health concern.  This is risk we either accept or ignore, but it’s there nonetheless.

People are killed every year by lighting.  People have been killed by an air-conditioner falling out of a building window.  Life is f'ing dangerous, at times.

Yet, even the riskiest adventurers as well as the experts in covert operations have learned to mitigate their risks.  They don’t jump out of planes without parachutes and they practice repeatedly so that an actual event becomes second nature.

We can’t escape risk so, therefore, we all must learn to deal with it.

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