All Forum Posts by: Jane Lewis

So what about CRE valuations. How do you consider them? I did some reading and it says there are several ways, but the most popular one is to base on cap rate?

If the tenant is a accreditable national chain store, is it still too risky to consider these kind of single tenant CRE?

0 Votes

Originally posted by @Jamie Rose:

Sounds pretty good... but that's assuming too much. Some of the initial questions we'd all want to know are:

Is this in a good area to invest - or is this an area that is going to be worth less each year? What are the assumptions to get to that Cap Rate around CapEx, Management, etcc., etc. Is the tenant in a great financial position to not worry about losing them? What are your contingencies in case they decide to break the lease and go elsewhere? Can you get 5.5% interest on a 30yr loan for commercial? Always exciting to think about a new investment!

Good points! It’s in DFW area so overall the economy is still good. I need to find out the lease term. Also can I request for the financial info for tenant? If the property is empty short term, I will not be able to afford the mortgage for sure. Thanks!

0 Votes

Originally posted by @Mark Bookhagen:

A couple notes:

- Commercial loans usually have a 20 year max amortization period.

- Need to know the credit rating of the tenant.

- Cap rates never include debt service in the calc. You want to calculate your cash on cash return which is (Net Cash at the end of 1 year / (all cash you bring to closing + cash you spend during the year including mortgage)

I recalculated based on your inputs. 20 yr 5.5% loan make the monthly payment of $7704. I know that I will unlikely get it at 5.5%. But I am trying to understand the concept. For yr one cash on cash return,

125400/(480000+7704*12)=21.9%

I didn’t include closing cost as I have no idea how much it would be.

Regardless, is this correct?

BTW it's an NNN lease.

Thanks all!

0 Votes

I saw a commercial RE for sale listed at $1,600,000. The building was built in 2001. Cap rate is 7.85%. NOI is $125,400. It is an NNN lease starting at Mar 2010 and ending at Mar 2030 with two options. Rent increase no more than 10% per five yrs. It is leased to an auto service chain. I did some calculation,

If 30% down, 30 yrs loan @ 5.5, the mortgage is $6359 per month. The cap rate is (125400-6359*12)/1120000=10.23%

So does this sound like a worthy deal? I am no professional investor at all. Just looking for some passive income. What are the potential deal breakers or concerns?

Thank you!

0 Votes

All Forum Posts by: Jane Lewis

Jane Lewis has started 1 posts and replied 6 times.

Post: is this a good investment?

Post: is this a good investment?

Post: is this a good investment?

Post: is this a good investment?

Post: is this a good investment?

Post: is this a good investment?