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Paradise, CA Needs Your Help

Collecting Gift Cards for California Fire Victims.  Here is a note from a good friend of mine recently: Hello fellow Oregon Golf Club members. I am sure that most of you are not aware that I grew up in Paradise, CA and still have many relatives and close family friends that until this past weekend still lived in Paradise. In the past few days, they, …

Basic vs Non-basic Employment

Whenever we are trying to accomplish our strategic analysis on an investment, the first step to knowing if it is a worthy investment is to understand the underlying market dynamics.  If real estate is “location, location, location”, why bother purchasing in an area that has stagnant or declining employment?  Even if it initially looks like a good deal, you may end up with a …

Conditional Love (CUP’s)

Just in time for Valentine’s Day, we’ll discuss Conditional Use Permits (CUP) and what to be aware of when looking for space.  Conditional Use Permits allow for different types of uses to be allowed in certain zoning districts, so long as they are beneficial or desirable to the city.  This flexibility means that businesses can apply and the city can approve the use as …

Stop! And Ask your CRE Broker These 3 Questions

After having been in real estate for over a decade you end up running into all types of commercial brokers.  Much like every other profession there are good ones and bad ones, brokers you are compatible with and some you aren’t, and some that have different goals and motives than what you are trying to accomplish.  Here are a list of some questions I …

ROIC – Return on Invested Capital

Another metric utilized by investors is the ROIC (Return on Invested Capital) analysis.  In order to reduce risk exposure, it’s important to understand when capital is invested and how quickly that capital is returned to you.  The faster those invested funds are returned, the faster those funds can be reinvested and diversified. ROIC takes into account several different factors including after-tax cashflows,  equity appreciation …

Holding Period and Your Investment Goals

When doing investment analysis on a property it’s easy to focus on the numbers relating to the returns on investment or the strength of the tenant(s).  However another important factor to consider is how an investment fits into your overall investment goals and your target holding period on the property. The holding period is the estimated time you expect to hold onto the property …

The Power of Leverage

Financial leverage is a very powerful tool.  Much like the Egyptians moved massive stones using a only a fulcrum and lever to build the pyramids, financial leverage allows investors to make purchases larger than their capital invested.  We discussed this idea in a previous post, regarding how this inherently makes real estate appealing compared to other asset classes. Using “OPM” (Other People’s Money) is …

Commercial SWOT Team

Facing investment dilemma?  Unsure about which property to go after or if it’s a good fit for your portfolio?  Perhaps it’s time to bring in the SWOT analysis team.  SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.  It’s an analysis that can be used in a variety of situations from starting a business to starting a long-term project.  In this case we’ll …

Understanding Vacancy and Credit Losses

Previously we discussed the beauty of the Annual Property Operating Data and how it’s essential to understanding the health of a building.  Now we’ll dive into the particulars of the line items in the APOD to better understand what we’re looking at.  Usually the calculation after the potential rental income is the vacancy and credit losses line item.  This is the income lost on …

Lease Options to Renew

When negotiating a lease agreement, one element that is usually brought up during negotiations is the lease option to renew.  Essentially this is the Lessee’s (tenant’s) “option” to renew the lease after the expiration of the initial term.  This is a benefit to the Lessee because they now have the flexibility to potentially test the market after the initial term, but still have a …

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