All Forum Posts by: Andrew Fielder

Josh you need to look at the underlying impacts for demand for office. So one of those things would be white collar employment growth. So if you see that in LA white collar growth exceeds the median than its a good indication that demand will be higher. Infrastructure spending, taxation, transportation and many more things can impact office demand. Correct me if I'm wrong but you are probably looking for what will drive capital prices up going forward. For that, you can't just rely on demand, you need to look at supply too. Vacancy rate is a good indicator of how demand and supply are impacting the market. You can find a lot of this data in the major agency reports. Not all their reports are released to the public. If you have connections with agents they are usually happy to forward you the reports. I'm happy to send you a few cbre reports of you want.

One of the best books I've ever read is Commercial Real Estate Investing by Dolf De Roos. Worth every penny.

@Rich P. Exactly right. If you know you costs eg. demolition/repair, financing costs, selling costs, contingency, professional fees, permits, etc. and you know what you call sell the home for brand new based on comps then you can calculate the residual value. 

For example say the development cost to build a new 3 bed house is $200,000 and you know that a brand new 3 bed house sells for $300,00 your profit before land costs equals $100,000. If you know you need a 25% profit margin (based on your return requirements) then you know the maximum you'd be willing to pay for the site is $75,000.

When there's a holding period with income in an analysis like this you have to capitalize income at market rates. In this case it's SFR residential so you don't need to capitalize income because you would be selling immediately anyways

You need to figure out the residual value of the site based on the desired profit margin. It's easy to do in a program like ARGUS developer or similar software but can be set up in excel as well you just need to put in the ground work.