Investment Analysis for Commercial Real Estate (an Introduction to NPV & IRR)

[@industrialize]

I've uploaded the data I reference in the video to Google sheets: docs.google.com/spreadsheets/d/1ynMaNr7RB2z8wjxceje5ZUO9hLiCVs9WvwpdIw9Ctq8/edit?usp=sharing

[@darinbrindle2882]

I love great teams, and long term relationships, extremely important! Can't wait for the next video!

[@industrialize]

@@darinbrindle2882 Thanks Darin, I greatly appreciate your comments and support!

[@MikeSoMoney]

Great job!! you just did the most simplest explanation of NPV

[@industrialize]

Much appreciated!

[@eldowns]

I can't believe how well organized and presented this is. Seriously impressed and grateful.

[@industrialize]

Thank you for the feedback, very much appreciated!

[@akmclemore]

Nice analysis bro! Your backdrop and production quality is awesome!

[@industrialize]

Thanks man, very much appreciated!

[@animeshbvu]

This is a great video Chad, crisp and to the point, and full of useful information !!

[@industrialize]

I appreciate the comments, thank you!

[@WillBockovenCRE]

Excellent

[@catl1099]

GREAT video, Chad! Really well done man!

[@industrialize]

Thanks Cat! I channeled my inner excel nerd for this one!

[@darinbrindle2882]

Great information Chad. What I learned is that real estate investors need to make sound investments with a solid rate of return, so they can invest back into the properties and hire me to complete improvements where needed for maintenance and improvements! As for all the calculations, I'll leave that to you and the experts! Haha

[@industrialize]

I couldn't have said it better myself Darin! My next video will be about the 10 tips I have for commercial real estate investors and one of them is making sure you have a solid team around you (including a great contractor, naturally!)

[@Real.Estate.Report]

Man this was jam packed with really helpful information. I have been studying these OM's and pro-forma's and admittedly I have been taking a much more simplified approach when it comes to my "underwrite" on the deals. I will for sure be watching this back next time I have a deal that I'm highly considering. Although I'm concerned that the discount rate equation will make an otherwise decent deal look much less attractive.

[@industrialize]

Using NPV & IRR for modelling becomes even more useful once you factor in debt and tax considerations. Getting an after tax and after debt IRR is a super useful tool! I'm putting together a google sheets file which will include a more elaborate spreadsheet as well. Thanks for the comments!

[@christopherdrobot1871]

Oh, when the video started into the excel I really got into it. Love it, Chad - great info. That negative nickel of NPV doesn’t quite exceed my hurdle rate though, so I’m doing to pass

[@industrialize]

From one excel aficionado to another, thanks buddy! Too funny on the -$0.05 NPV, imagine a deal getting lost because of something like that haha!

[@alana.8593]

What is the Discount Rate? Is that inflation? Newbie here.....

[@industrialize]

Great question! The terminology can vary across industries (in banking it’s often referred to as the rate the Feds charge commercial banks to borrow, so I’d look at the intent of these rates rising is to combat inflation). In the context of real estate, or finance in general, a discount rate is the rate an investor chooses to discount all the future cash flows to the present value. There are numerous ways of determining this rate, such as the desired rate of return the investor wants to achieve (while simultaneously accounting for risk), or it could just be a rate that’s common in the market, or it could also be calculated by adding some risk premium to the 10 year treasury. The higher the discount rate the lower the present value and vice versa.

[@sayyamzahid505]

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[@industrialize]

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