Debt financiers often prefer debt service coverage ratio (DSCR) and loan to value (LTV) when arriving at the maximum loan on a definite property. $$ \text{DSCR} = \frac {\text{Year one NOI}}{\text{Debt service}} $$ Where: $$ \text{Debt service} = (\text{Interest}…

 Economic Drivers The following economic factors affect the demand for major property types: GDP: This is by far the most important economic factor as it affects all property types. As the GDP grows, the demand for real estate investment…

 Private equity real estate investment indexes allow investors to analyze property investment performance using either appraisal-based or transaction-based index methods. To determine the best index method to employ, the investor needs to clearly understand the modalities of how the…

 Real estate investment requires more extensive due diligence compared to public debt or equities due to its lack of transparency, standardization, and the significant impact of a property’s physical characteristics and location. Unlike other assets where investment decisions rely…

 Direct capitalization method, the stabilized net operating income (NOI) is divided by the market capitalization rate. In contrast, for the DCF method, the NOI for each year during the holding period plus the salvage value at the end of…

 The direct capitalization method estimates the value of a property by capitalizing the first-year NOI at a market-derived cap rate. The discounted cash flow method projects income after the first year and discounts the income at a yield rate…

 Net Operating Income The net operating income (NOI) is calculated when using the income approach to evaluate properties. The number of revenues collected from a commercial property net of operating expenses before interest and taxes. However, NOI is guided…

Valuation of Real Estate Properties Valuation of any commercial property is intrinsically valuable as it determines the worth of any particular real estate property. Income Valuation Approach In this scenario, a comparison is created where an investors’ acquisition price is…

 Given the real estate cycle and its impact on portfolios, we now examine specific demand and supply factors influencing the risk and return of commercial real estate subsegments, including residential and non-residential properties like office, industrial, retail, and hospitality…