How To Run Numbers on Commercial Properties (In-Depth Guide)

Are you new to commercial real estate and having trouble running numbers on these investments? In this concise and informative video, we guide you through the essential steps of running numbers on commercial properties. Whether you're interested in retail, office, or industrial investments, learn how to analyze deals, calculate financial metrics, and make informed decisions to grow your real estate portfolio. Get ready to take your investing journey to the next level!
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[@sarakemp3174]

Love this video! Thanks Tyler

[@TylerCauble]

Of course! Glad you liked it

[@leeforsyth2036]

So looking forward to you and your team’s thoughts on such a difficult subject. I, like many others have yet to pull off that critical first deal. This is gonna be a big one, being this subject is the most crucial and important hurdle to overcome, that of determining and proving the value of a peace of property. We value your thoughts, and understanding of the concepts of CRE as y’all have proven so many times in the past. Many others have danced around the subject of underwriting as we have witnessed, and not to add any more pressure on you and your team, but I have a feeling you’re fixing to bring it on strong, but yet humbly as you have so graciously many other times. Coming from a Georgia boy, and surely speaking for many others, who loves to travel up in to the wonderful state of Tennessee, we will trust in Him you and your team member’s travels well always be safe..

[@TylerCauble]

Absolutely - glad you're enjoying it! Let me know what you thought of the video

[@Adrian-Warsaw-Real-Estate]

This is great! I am learning and getting into the commercial market in Warsaw Poland! Lots of simmilarities but way more big institutions. Less privately owned commercial deals. Big plots are bought and developed. and whole plots are developed by 1 company and sold to another. I feel like it makes it harder to find less pricey commercial properties. BUT, I am sure I will need to get creative and find other ways to add value!

[@TylerCauble]

You can do it! I'm convinced there's room in every market for the smaller guys (which I would consider myself to be). Those smaller deals don't hit the radar of the institutional guys, so it gives you a solid opportunity to build a strong portfolio of investments there.

[@TylerCauble]

I've just launched a FREE crash course on commercial real estate investing for beginners. Check it out at www.tylercauble.com/course

[@R-B_consider]

great video.

[@TylerCauble]

Thanks!

[@constructionanddirt4220]

How do u find out what commercial rental rates are?

[@AberrantArt]

Tyler, you mentioned triple net numbers. If this is an apartment complex, would you instead back out all debt payments, capex, maintenance, vacancy, management etc... and use that instead if the tripple net?

[@TylerCauble]

Yep that’s Exactly right - you’d have to back out any operating expenses that you would be responsible for as the owner to get to the same numbers

[@AberrantArt]

@TylerCauble got it. This significantly lowers the purchase price we can offer. I took the annual net Profit number based on current rents and divided by 0.12 and got a very low number to offer. Is there something I'm doing wrong?

[@TylerCauble]

@@AberrantArt Nope - you're probably doing it right but most owners aren't willing to sell a property with active cash flow at such a high cap rate. Most of the assets I'm underwriting are heavy value-add so there aren't existing tenants and work needs to be done to the property. In the multifamily world, 8% cap rate would likely be the equivalent right now

[@matthewteitelbaum1957]

Great video, can you provide a video about proformas diving deeper into discounted cash flow analysis ?

[@TylerCauble]

I never use discounted cash flow analysis, so I don’t have any videos on it. We look at cash on cash, equity multiples, and IRRs. Here are a couple of videos though that go more into underwriting CRE: kzbin.info/www/bejne/rpnXfYKZqb52rrs kzbin.infoaBfi6rSMRmE

[@matthewteitelbaum1957]

@@TylerCauble thanks Tyler, I’ll check them out.

[@TylerCauble]

@@matthewteitelbaum1957 Anytime

[@Tyler-lt4xh]

Are you saying "buying it at a 12 cap" and then comparing to buying it at an 8 cap? Because that would change the purchase price. I'm confused where you're getting the 12 cap and 8 cap from.

[@mikefeir]

He wants a 12 cap rate but he is discussing the possibility of accepting a worse return at 8 cap rate

[@TylerCauble]

Good question - that's just the cap rate that I underwrite my properties to. 12% cap rate is the number that makes a deal worth it for me, but you could choose an 8% cap rate or 20% cap rate - it all comes down to the returns you need to achieve in order to make the investment worth it. This scenario assumes a vacant building, so there is no cap rate on the property when purchasing it since there's no income. I'm saying I need to be able to get enough rent to make it a 12% cap rate for me once it's fully rented.

[@TylerCauble]

@@mikefeir Nailed it

[@ashleyturner2773]

Hi, I want to do this . Do you have a mentorship ?

[@TylerCauble]

Absolutely - you can get access to my course, community, and monthly coaching calls through my CRE Launch Pro program here: www.crelaunchpro.com Or you can schedule 1-1 coaching calls with me here: www.calendly.com/tylercauble/30min

[@reinvestorshow]

Isn't cap rate supposed to determine the value of the property from the rent.. Not the rent from the value? Because market should determine rent and if investors are buying at a certain cap then that leads to the value.. Which is how you'd get how much you can refinance for and such.

[@TylerCauble]

It works both ways - if you already have rent and a market cap rate, then you can determine the property's value. If you have a specific cap rate that you want to hit on a property and you know what the costs are, then you can determine the rental rate needed in order to hit that return. I cover that in the video - if market rates are above the cap rate that you want to achieve, then you're good to go on that investment. If market rates are below that rent that you'd need to get, then it's not a deal.

[@legalreefer4204]

You keep saying 20% down- but EVERY mortgage broker/ originator tells me the minimum down payments for CRE right now are 40-50%. I think your stature in the industry isn’t translating to new investors.

[@TylerCauble]

No, 20% to 25% down is standard across the industry, you’re welcome to look that up. Lenders also have what’s called a debt service coverage ratio, which is the amount of cash flow a property must bring in in order to cover the debt payments and make a profit. Either you’re talking to the wrong lenders (I always talk to at least 3-5 local banks) or the properties you’re looking at don’t have enough cash flow to make them comfortable, meaning you need to bring my cash down. I wish I got special treatment and didn’t have to bring so much! Haha

[@Theredeemedbychrist316]

this dude is super cheap and will never get to that next level

[@TylerCauble]

that's an interesting take

[@theoriginaljean3917]

2.5k a month? All this investment just for that amount? I mean granted you eventually buy and keep the property at the end, but this is clearly no more than an investment, you can’t make a living out of it until you have a few of these and rent other aspects of the property like parking space or events.

[@TylerCauble]

$2,500 is a small property - we’ve got assets that bring in five figures a month. However, $2,500 makes a massive dent in most people’s lifestyles and can be a much needed financial addition