*NOTES* Analyzing Commercial Real Estate Quickly and Easily It’s not as hard as you think *You want to know 3 things* - How much money does it make? - What is your ROI - How does this investment compare to other investments? *These 5 terms are your guiding principles of investment* - Income and Expenses - Net Operating Income (NOI) - Cash Flow - Cash on Cash Return - Capitalization rate (cap rate) - Income and Expenses - Rent - Laundry Income - Late Fees - Insurance - Taxes - Utilities - Repairs and Maintenance - Landscaping - Property management fees - *NOT INCLUDED* Mortgage expense - Net Operating Income (NOI) - Income Minus Expenses - Your income after you subtract expenses - Cash Flow - NOI minus your mortgage payments - Cash on Cash Return - How fast your money is moving - How quickly can you get your money back from the investment? - It's your ROI - If you get it back in 1 year, that's considered a 100% back ROI - Cash on Cash Return - NOI divided by sales price - Capitalization rate (cap rate) - High cap rate. Bad. Low cap rate. Good! - The higher the cap rate, the higher the risk, the higher the potential return, the lower the price - Low cap rate. Good neighborhood. The lower the risk/return, the higher the price *RULES OF ENGAGEMENT* Your guiding principles to what you should choose to invest in - Income and Expenses - Inc. must be greater than expenses - Net Operating Income (NOI) - NOI > mortgage payments - Cash Flow - Positive cash flow - Cash on Cash Return - Equal to or greater than 10% - Cash on Cash Return - Greater than or equal to 8% Example at the end 11:50
Sir - I truly appreciate the knowledge you are sharing. very clear and informative. I learned more watching your videos than attending real estate meetings. thank you.
I'm SO excited about getting into Commercial Real Estate since I discovered you, Peter. I never even considered CRE as a viable investment option for me until I first saw Peter's videos a few days ago and now I'm hooked on this new and different strategy for making money through CRE. And I can't stop watching Peter's videos bc he's like a father who truly cares about helping others and is very very smart! I look forward to continue learning from Peter and changing my life and my family's life forever.
I've been having so much trouble creating a simple structure that could follow from one calculation to the next and then I found this video. Thank you. Thank you sooo much.
Yes Gabriel it is a Great video!!!! he is a great teacher and there are people who makes this so complicated that actually put people off. Thank you CPA
Man. I am not even half way through this video and this is already a MASSIVE help. By far the best, most functional explanation I have found on youtube so far!!
THANK YOU THANK YOU!!! Before his videos I felt so lost trying to wrap my brain around commercial lending for my job. Dots are now connecting and making sense. So much Finance Jargon to understand. Lol!
I've been watching videos from this channel for the past 2 weeks. Now I just realized that I'm also reading Peter Harris' book Commercial Real Estate for Beginners on my Kindle. Cool. I look forward to getting this Commercial Real Estate thing poppin!
Mr. Professor Harris, I address you Sir respectively. All of the thousands of pages I have read in Real Estate. You make this simple and to the point. I want to thank you for your expertise, may God bless you.
I’ve watched 9 minutes and this guy is awesome! Thank you, Peter! I just finished Stanford LEAD @ GSB so I wanted something simple and easy to understand, and this is it!
8-2017. We have Cap rates in Orange County CA in the 4.5% (dangerous neighborhood) to as low as 1.8% in the high demand beach communities. There hasn't been a 8% yield here in YEARS..... However vacancy rate is close to zero. Our democrat government has such strict zoning and building codes there is very very little new construction here....So the limited supply allows ever increasing rents that continue to squeeze tenants ...I am a long time investor and Realtor. (great videos btw)
Apologies, I have been meaning to comment. I enjoy your tutorials, thank you so much for all the energy you put. Happy new year and have a blessed 2019
Learning much and you make it easy. Now I need to overcome my intimidation factor to move out with climbing this hill....not a mountain....I did that on purpose.
I've been a residential Realtor for 20 years and this is the best explanation of these terms. Peter, you mentioned that want a positive cash flow. Do you ever put a percentage on that as you do with cash on cash and cap rate?
Great info and easy to understand but the only problem is when you tell people their cash on cash return should be 10%+ and CAP rate of 8%+ you aren't considering location and or timeliness of the market. I am in San Diego and CAP rates never hit 8% but that doesn't mean you shouldn't buy. Great video. Curtis Gabhart,CCIM
As it relates to CAP rates, I agree that it can be relative and it's a guiding principle, not a set-in-stone rule. However, cash on cash is not relative. Why tie up your money at 6% cash on cash returns when you can buy elsewhere and get 20% returns? It would be financially irresponsible to bury your talents in poor performing assets when there are so many others out there that are so much better.
Hey I get what you're saying and I can see you know what you're doing unlike many of the people online but CAP rate is just one measure and part of the equation (although important). It's a risk/reward/effort thing, Although our prices are very high in San Diego, one thing I have learned over the years cold-calling thousands of owners is very few regretted not buying away from San Diego but a majority of those who went elsewhere regretted it, including myself. The bottom line is you have great content, great advice, explained very well. Curtis
get peter, nice video and I like that you include rule of thumbs as s reference. however, not that the COC return is compressed if you are a cash buyer. in this example, if you paid cash, the coc return would be 8% which would not meet your threshold. I think 10% threshold for coc return is a good rule of thumb when soing 25% down
Learning a lot through your videos! Thank you so much! Great work! Would like also to ask - would that be a good idea (or how good it is ) for person in his early 30s, who does not own any property yet, to put all his savings into a commercial real estate purchase?
Hello Mr. Harris, I really enjoyed watching your video. Very informative. Do you know where you can find the accurate information of a property in order to make these calculations? I was told by a coworker that you cannot fully trust the numbers the seller gives you , because they are trying to make the property seem better than it actually is. If I may ask, where do you go to make sure you receive accurate information about a property you are looking into possibly buying? I appreciate your response.
I really enjoy your content. You make it so simple for so many people to understand. Do you know commercial properties owners who are interested in public art to raise the value on their property when selling properties on the market? I appreciate what you do and look forward to developing a long term relationship with you.
+Mary McDonough Google "Mortgage Calculator" and use the rule of 25% down payment required, 25 year amortization and as of this writing, 5% interest rate.
I am practicing analyzing commercial real estate deals and have received property information from a broker. They have included an in-depth spreadsheet that lists the income and expenses and even calculates the NOI. My main concern is this: How do I know if I can trust the numbers given to me? I will recalculate the NOI to be certain, but what if the income and expenses are wrong/deceptive? How can I protect myself if they made a mistake or are lying?
what about a boarded up commercial t.i property? there's a property i saw looks like i would remodel top floors for residential bout 3 units, and downstairs i could remodel and get 3 t.i leases once its remodeled. im a commercial rehab contractor, commercial carpenter 20 years now. I want join your team sir.
I like your vidoes. But the figures (money) you use does not appear to relate to the new York market. Currently, a 6 unit in Brooklyn cost 1.5 million dollars. I would love to be in a market where a down payment requirement is $20k.What say you regarding interested commercial property owners in a new York market?
I really value your teaching. As stated by others, it is simple and straight forward, as it should be! That said, I've been working on analyzing deals. However, there is one area I'm stumped on. I realize I don't include my expected mortgage under expenses, however, are you saying I exclude the seller's mortgage payment as part of the monthly expenses? I realize this is a very base question for you but it has me stomped for the moment.
I figured it out already but appreciate the reply nonetheless. Your teaching is awesome. I'm under contract on a MF deal currently and your online teaching gave me the confidence to go down this path. Keep up the excellent work sir.
Peter, you are fantastic. Do you have a video discussing how to get accurate information from the seller? I’m confident in finding deals now but not so confident in the information that the seller will provide for me! Thanks.
I'm thinking about buying my first commercial apartment property the sale price is 200000 and I only get generate 1109 a month plus I live for free in a unit u think is a good investment ?
Discover all you need to know about analyzing commercial real estate in my Protege Program: www.commercialpropertyadvisors.com/protege-program
The only guy on CZcams who makes it easy to understand for beginners
For dummies*
True
Hence the name of the book “for dummies”
Did you buy the course yet? 🤔🤔
@@raheemtheinvestor nope. I heard they try to upsell u by having to buy 20k plus mentorship. I didn’t continue. So much content on CZcams.
This guy is one hell of a teacher. This single video saved me from doing something very foolish. Thank you!
*NOTES*
Analyzing Commercial Real Estate Quickly and Easily
It’s not as hard as you think
*You want to know 3 things*
- How much money does it make?
- What is your ROI
- How does this investment compare to other investments?
*These 5 terms are your guiding principles of investment*
- Income and Expenses
- Net Operating Income (NOI)
- Cash Flow
- Cash on Cash Return
- Capitalization rate (cap rate)
- Income and Expenses
- Rent
- Laundry Income
- Late Fees
- Insurance
- Taxes
- Utilities
- Repairs and Maintenance
- Landscaping
- Property management fees
- *NOT INCLUDED* Mortgage expense
- Net Operating Income (NOI)
- Income Minus Expenses
- Your income after you subtract expenses
- Cash Flow
- NOI minus your mortgage payments
- Cash on Cash Return
- How fast your money is moving
- How quickly can you get your money back from the investment?
- It's your ROI
- If you get it back in 1 year, that's considered a 100% back ROI
- Cash on Cash Return
- NOI divided by sales price
- Capitalization rate (cap rate)
- High cap rate. Bad. Low cap rate. Good!
- The higher the cap rate, the higher the risk, the higher the potential return, the lower the price
- Low cap rate. Good neighborhood. The lower the risk/return, the higher the price
*RULES OF ENGAGEMENT*
Your guiding principles to what you should choose to invest in
- Income and Expenses
- Inc. must be greater than expenses
- Net Operating Income (NOI)
- NOI > mortgage payments
- Cash Flow
- Positive cash flow
- Cash on Cash Return
- Equal to or greater than 10%
- Cash on Cash Return
- Greater than or equal to 8%
Example at the end 11:50
👆🏼
Sir - I truly appreciate the knowledge you are sharing. very clear and informative. I learned more watching your videos than attending real estate meetings. thank you.
Greatest teacher on commercial RE I have ran into. Thanks Peter!
I just learned more in 16 minutes, than I learned in two weeks of classes.
Great teaching. Thank you sir
Shutup
You should stop sleeping in class then.
Lynn, have you pulled the trigger on buying a property?
I'm SO excited about getting into Commercial Real Estate since I discovered you, Peter. I never even considered CRE as a viable investment option for me until I first saw Peter's videos a few days ago and now I'm hooked on this new and different strategy for making money through CRE.
And I can't stop watching Peter's videos bc he's like a father who truly cares about helping others and is very very smart!
I look forward to continue learning from Peter and changing my life and my family's life forever.
Welp, how ya doing now? Talked a huge game about this guy haha
I've been having so much trouble creating a simple structure that could follow from one calculation to the next and then I found this video. Thank you. Thank you sooo much.
Thanks for breaking this down in an "easy" way to learn real estate investing.
Yes Gabriel it is a Great video!!!! he is a great teacher and there are people who makes this so complicated that actually put people off. Thank you CPA
Man. I am not even half way through this video and this is already a MASSIVE help. By far the best, most functional explanation I have found on youtube so far!!
You just simplified everything. Sending positive vibes your way and thank you!!!
THANK YOU THANK YOU!!! Before his videos I felt so lost trying to wrap my brain around commercial lending for my job. Dots are now connecting and making sense. So much Finance Jargon to understand. Lol!
I read this a few times in the book, but this video made it much clearer. I understand it now. 👍🏽
I've been watching videos from this channel for the past 2 weeks. Now I just realized that I'm also reading Peter Harris' book Commercial Real Estate for Beginners on my Kindle. Cool. I look forward to getting this Commercial Real Estate thing poppin!
Keep it up!
T Stanton How's it going??? Commercial deals popping yet?
T Stanton How has the progress been? I am planning to pursue CRE in New York City
T Stanton it's a great book and I use it to supplemnt my college studies
T Stanton it's been two years now... is Commercial Real Estate doing well for you???
Mr. Professor Harris, I address you Sir respectively. All of the thousands of pages I have read in Real Estate. You make this simple and to the point. I want to thank you for your expertise, may God bless you.
Thanks so much for the simplification and sequential explanation.
You seem to be a honest and credible man. Good stuff!
thanks for the video I think you just taught me how to look smart next time I talk to an investor
I’ve watched 9 minutes and this guy is awesome! Thank you, Peter! I just finished Stanford LEAD @ GSB so I wanted something simple and easy to understand, and this is it!
8-2017. We have Cap rates in Orange County CA in the 4.5% (dangerous neighborhood) to as low as 1.8% in the high demand beach communities. There hasn't been a 8% yield here in YEARS..... However vacancy rate is close to zero. Our democrat government has such strict zoning and building codes there is very very little new construction here....So the limited supply allows ever increasing rents that continue to squeeze tenants ...I am a long time investor and Realtor. (great videos btw)
Mr. Harris, you are a great instructor and motivator. You make your lessons easy to follow and explain! ❤
Thanks Peter. You are an excellent teacher. Thanks for the clarity and the step by step procedures.
Nice, practical frame of reference - thanks!
I don’t know what it is, but this guy just seems like a really nice person
can not be simpler and easier than that, best video .
Apologies, I have been meaning to comment.
I enjoy your tutorials, thank you so much for all the energy you put.
Happy new year and have a blessed 2019
Wow, you have a God-given gift for teaching! Many thanks!
Wow, this is awesome. You really simplified it for me. Thanks!
Peter - thanks for making it so easy! Would love to see a video on where to look for good investments.
Learning much and you make it easy. Now I need to overcome my intimidation factor to move out with climbing this hill....not a mountain....I did that on purpose.
Man your videos are a huge help thank you!!
Wow - you really are an expert in this you broke it down clearly that makes easy to understand !
This should be in the business class at the university. Thank you for teaching
Thank you for this training. I now understand how to analyze properties. I have confidence.
He is truly an instructor who "KNOWS" his area of expertise. Suggest a commercial CMA software.
I’m officially an expert after watching this video.
Winning information from a winning teacher, thank you.
great informative video. even with a finance degree i didnt know to value a property. now i do. thank you
Clearest best taught explanation I've seen. Thanks!
Making this explanation so easy!
Good stuff Peter👍
I've been a residential Realtor for 20 years and this is the best explanation of these terms. Peter, you mentioned that want a positive cash flow. Do you ever put a percentage on that as you do with cash on cash and cap rate?
Awesome, detailed explanation! Thanks! 🙏
I’m going to call you coach bc you remind me of one of my old b-ball coaches... anyways thanks, Coach... You’re a beast!
Thanks for your great explanations. They are very helpful.
Great info and easy to understand but the only problem is when you tell people their cash on cash return should be 10%+ and CAP rate of 8%+ you aren't considering location and or timeliness of the market.
I am in San Diego and CAP rates never hit 8% but that doesn't mean you shouldn't buy.
Great video.
Curtis Gabhart,CCIM
As it relates to CAP rates, I agree that it can be relative and it's a guiding principle, not a set-in-stone rule. However, cash on cash is not relative. Why tie up your money at 6% cash on cash returns when you can buy elsewhere and get 20% returns? It would be financially irresponsible to bury your talents in poor performing assets when there are so many others out there that are so much better.
Hey I get what you're saying and I can see you know what you're doing unlike many of the people online but CAP rate is just one measure and part of the equation (although important).
It's a risk/reward/effort thing, Although our prices are very high in San Diego, one thing I have learned over the years cold-calling thousands of owners is very few regretted not buying away from San Diego but a majority of those who went elsewhere regretted it, including myself.
The bottom line is you have great content, great advice, explained very well.
Curtis
get peter, nice video and I like that you include rule of thumbs as s reference. however, not that the COC return is compressed if you are a cash buyer. in this example, if you paid cash, the coc return would be 8% which would not meet your threshold. I think 10% threshold for coc return is a good rule of thumb when soing 25% down
Or what it also indicates is that if you are going to pay all cash, you need higher cap rate deals than if you borrow.
This man is a blessing
Straight to the point.
Thanks for the quick response
Learning a lot through your videos! Thank you so much! Great work! Would like also to ask - would that be a good idea (or how good it is ) for person in his early 30s, who does not own any property yet, to put all his savings into a commercial real estate purchase?
Go big or go home! That's the age I was when I got started.
thank you Sir! Another thing to figure is whether it is a good time right now - when everything reached its highest point.
You are the best Pete Harris!
Such a great teacher
This is great, thank you Sir.
Thank you
You are great !!!!
Best teacher ever!
Hello Mr. Harris,
I really enjoyed watching your video. Very informative.
Do you know where you can find the accurate information of a property in order to make these calculations?
I was told by a coworker that you cannot fully trust the numbers the seller gives you , because they are trying to make the property seem better than it actually is.
If I may ask, where do you go to make sure you receive accurate information about a property you are looking into possibly buying?
I appreciate your response.
I love your training. You are a great instruction and the material content is well presented.
Mr. Harris, you are awesome. Nice job!
Great teacher!
You are my master.
What is the difference between CFAT vs CFBT?
What is the difference between Operational Expenses vs Capital expenditure?
Great Video, great n4, sooo simply put...Thanx Peter!!
I really enjoy your content. You make it so simple for so many people to understand. Do you know commercial properties owners who are interested in public art to raise the value on their property when selling properties on the market? I appreciate what you do and look forward to developing a long term relationship with you.
No
Thank you for the lesson !
Our pleasure!
thank you very much Peter, your videos are awesome!
Great breakdown
Awesome video... Thank you!
Thank you! Concise & clear!
This is truly terrific.
Thank you that was very informative.
Great explanation thank you for this video
Nice job Peter!!!
This guy knows how to teach a high school student to understand about real estate.
Thank you Peter
Hi Peter, Could you go over how to estimate the mortgage payments? Thanks for these great videos!
+Mary McDonough Google "Mortgage Calculator" and use the rule of 25% down payment required, 25 year amortization and as of this writing, 5% interest rate.
Did you play Erin on the Waltons? Or are you another Mary McDonough?
Valuable video. Thanks..
Great instruction! Great Book! Thanks!
Great info and great teacher! Thank you.
Absolutely brilliant video thank you! 👍
Need a video of potential problems. Bad things that happen to watch out for.
I am practicing analyzing commercial real estate deals and have received property information from a broker. They have included an in-depth spreadsheet that lists the income and expenses and even calculates the NOI. My main concern is this: How do I know if I can trust the numbers given to me? I will recalculate the NOI to be certain, but what if the income and expenses are wrong/deceptive? How can I protect myself if they made a mistake or are lying?
(1) You can't trust those numbers.
(2) Assume that they are deceptive.
(3) Watch this video: czcams.com/users/edit?o=U&video_id=0HEL1qdfXEY
Thank you for the response Mr. Harris but when I tried to use the link a blank page appeared with the notice "The URL contained a malformed video ID".
Very good presentation...thank you Sir.
Well Done ,, " Thank You "
Thanks for your videos .. What's the best state or city for commercial property investment?
Thank you...
what about a boarded up commercial t.i property? there's a property i saw looks like i would remodel top floors for residential bout 3 units, and downstairs i could remodel and get 3 t.i leases once its remodeled. im a commercial rehab contractor, commercial carpenter 20 years now. I want join your team sir.
I like your vidoes. But the figures (money) you use does not appear to relate to the new York market. Currently, a 6 unit in Brooklyn cost 1.5 million dollars. I would love to be in a market where a down payment requirement is $20k.What say you regarding interested commercial property owners in a new York market?
+Save Money This is a teaching video the amounts do not matter, you can apply this to any amount or project.
Thank you Peter!
Very useful!!
I really value your teaching. As stated by others, it is simple and straight forward, as it should be! That said, I've been working on analyzing deals. However, there is one area I'm stumped on. I realize I don't include my expected mortgage under expenses, however, are you saying I exclude the seller's mortgage payment as part of the monthly expenses? I realize this is a very base question for you but it has me stomped for the moment.
It's called Debt Service; that is not included in NOI and Cap Rate determinations
I figured it out already but appreciate the reply nonetheless. Your teaching is awesome. I'm under contract on a MF deal currently and your online teaching gave me the confidence to go down this path. Keep up the excellent work sir.
You are the best!!
Thanks. Blessings...
Thank You!
Peter, you are fantastic. Do you have a video discussing how to get accurate information from the seller? I’m confident in finding deals now but not so confident in the information that the seller will provide for me! Thanks.
I'm am shooting that video shortly
@@CommercialPropertyAdvisors Thank you!
I'm thinking about buying my first commercial apartment property the sale price is 200000 and I only get generate 1109 a month plus I live for free in a unit u think is a good investment ?
+Gabriel Cardenas Maybe
Live in it, but pay the rent towards the mortgage. Your keeping the money regardless, instead of spending the money you will be paying down the asset.
Super useful
Great video!!! Are taxes accounted as operational expenses or part of the mortgage?
Operational expenses; NOT part of debt service