Real Estate Related

Here are some thoughts on getting the answers you need to determine if it’s a good deal or loser.
Since Cap Rates are dependent on NOI (Net Operating Income) it is critical you are certain the bottom line is true. Whenever possible request a copy of the schedule E tax return or a certified income / expense statement. This is part of your ‘Due Diligence’.

• Are the figures presented actual or proforma (What they could be if someone else owned it)?
• Be certain the OER (Operating Expense Ratio) is realistic for the type property you are evaluating.
• Verify that all the expenses for the property are reported, all the vacancies are likewise noted and rents are not inflated. It is easy to manipulate cap rates by fudging the a fore mentioned financials.
• Who is paying the utilities, the tenant or the landlord? Energy prices have sky rocketed recently and may well go higher, seek out and verify the quantity (Gallons, Cubic Feet, KW etc.) of fuel used and calculate the expense based on current prices.
• Is a management fee included and is the fee consistent with market rates.
• Be certain maintenance and repair costs are realistic. Compare them against any deferred maintenance observed.
• Compare the individual expenses per unit or square footage (Lets call them ‘Financial Metrics’) with other similar properties.

After you have confidence in the financials you can then determine a price you are willing to pay for the returns expected.

Remember the old adage ‘If it looks to good to be true, it probably is’.

One of the most important part you need to know about is mortgage, mortgage is a loan that is secured against real property, such as a house, and for that you need a A mortgage attorney is a lawyer who specialises in assisting clients with all aspects of the mortgage process. They provide advice and guidance on mortgage security, contractual documents, loan modifications, foreclosure defense, lender/servicer disputes, loan refinancing, and similar topics. An attorney can help borrowers understand their rights and ensure they get the best possible outcome.

This entry was posted on Saturday, October 10th, 2009 at 4:35 pm and is filed under Investment. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.