Valutate: “A Pro-Forma in Your Pocket”

What many new commercial brokers don’t know about commercial real estate is that there is actually a great deal of number crunching involved with a commercial real estate transaction. If math isn’t your strongest suit, then you might be hesitant to try to do any or all calculations yourself. Read More

Promote your Expertise with a Branded Financial Calculator

Investors, sellers, and buyers of commercial property are researching and studying the market constantly. A Google search for financial calculator returns almost 3 million results!

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The Investment Property Valuation Calculator Tutorial

The Investment Property Valuation Calculator is a commercial investing calculator and an invaluable tool for investors and brokers alike. When used effectively, the IPV Calculator can help you plan ahead with your commercial property investments. An in-depth reading of the results can reveal when the best time to sell would be, areas where building expenses could be trimmed back, and many other insights that will create the best return on your commercial investment.

investment property valuation calculator

This is a basic tutorial that will introduce you to the IPV Calculator and some basic commercial real estate terms.

To begin valuing your investment property, visit IPVcalculator.com

Step 1:

investment property valuation calculator

The IPV Calculator relies on a short, seven step process to supply you with a ten-year plan for your commercial property. To start, answer the question, “What type of investor are you?”

investment property valuation calculator

Are you looking to buy or sell your property?

Next, you’ll specify the Property Type of your building. If you’re unsure, you can learn more about the five general property types here.

investment property valuation calculator

Different commercial real estate property types require different information to give you an accurate reflection of their worth. So it’s important to specify the correct type! The expenses for a multifamily apartment will be very different than those of an office property. As will the type of lease you have established with the tenants.

That’s it for Step 1 of the IPV Calculator! Pretty simple. When you’re ready for Step 2, hit “Go to next step” to continue valuing your property in the commercial investing calculator.

investment property valuation calculator

Step 2:

The second step in the Investment Property Valuation Calculator is all about income! Here, you’ll discover how much Gross Income your property is bringing in. Gross Income is the total amount of money you are making, before deducting taxes and expenses.

It’s important to enter in as much data as you have on income, including individual tenant’s rent. The more information you can provide, the more in-depth analysis you’ll have of your property’s worth.

If you do not have the information readily available, or you have many, many tenants, you have the option to skip individual entries and enter the single lump sum of your building’s income.

 

Feel free to enter income number you most readily know. If you enter in your total monthly income, the commercial investing calculator will automatically calculate your annual income. This also works in reverse if you enter your annual income first.

Property Income refers to “income received by virtue of owning property.” The three forms of property income are rent—received from the ownership of natural resources; interest—received by virtue of owning financial assets; and profit—received from the ownership of capital equipment.

The Property Square Footage is the amount of space your property takes up. A square foot is defined as the area of a square with sides of 1 foot in length.

investment property valuation calculator

Vacancy Rate can be tricky. The vacancy rate refers to “the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time.” For example, if you have a four unit apartment, and a tenant moves out of one unit, your vacancy rate is 25%.

For the IPV Calculator, we recommend entering in the average property’s vacancy rate in your market. This number can swing drastically in different directions based on your property type and location, so expect to do some research. If you’re unsure, contact a local commercial real estate broker. They will be happy to help you out!

When you’ve entered all the figures you can, hit “Go to next step” to continue valuing your property with the commercial investing calculator.

investment property valuation calculator

Step 3:

investment property valuation calculator

In Step 3, you’ll break down the expenses it takes to run and maintain your property. This will provide you with a better idea of how much each charge is cutting into your profit and where you could potentially save money.

investment property valuation calculator

There are typically two types of leases when dealing with commercial real estate, Gross Lease and Triple Net Lease (NNN). If a Triple Net Lease has been signed, the tenant agrees to take on the full extent of the building’s expenses. They will cover taxes, insurance, maintenance and nearly every billable item.

With a Gross Lease, it is the landlord who is responsible for paying the majority of the building’s expenses. The tenants pay a singular rate throughout the year.

Click here to learn more about the two types of leases.

investment property valuation calculator

As with income, we recommend you fill put as many details as possible into the commercial investing calculator for your building’s expenses. Every expense you input will lead to a more comprehensive view of your property and allow you to more strategically outline your future plans for it.

The Investment Property Valuation Calculator automatically creates fields for some of the most common expenses, but you are free to create delete or create your own depending on your property’s unique needs.

investment property valuation calculator

If you are unsure of your property’s various expenses, there is the option to enter the total lump sum of your building’s cost. This will result in a less detailed, but still functional final report.

investment property valuation calculator

When you’ve entered all the expenses you know, hit “Go to next step” to continue valuing your property with the commercial investing calculator.
investment property valuation calculator

 

Step 4:

investment property valuation calculator commercial investing calculator

In Step 4 of the IPV Calculator, you’ll focus on valuing your commercial real estate property. You’ll advance from this step with a better understanding of what your building is worth and an estimation of its Cap Rate.

investment property valuation calculator

Before you begin, it’s useful to understand a couple terms. First Net Operating Income (or NOI) is a calculation used to determine the profitability of a property. NOI is determined by adding all revenue generated from the property (rent, parking, etc) minus all reasonably necessary operating expenses (insurance, repairs, etc.)

investment property valuation calculator

A Capitalization (Cap) Rate is a little more complicated to figure out. A cap rate is the rate of return anticipated for one year if the property was paid for in cash — it’s the ratio between the NOI and the property value. It is determined by evaluating the financial data of similar properties which have recently sold in a specific market. The cap rate calculation incorporates a property’s selling price, gross rents, non rental income, vacancy amount and operating expenses.

Generally, buyers are interested in properties with a higher cap rate, while sellers want their cap rate to be low. You can use the slider at the bottom of the page to see how the cap rate affects the value of your property. As the cap rate goes up, your property’s value goes down.

If you’d like to learn more about cap rates, read out article for a more comprehensive explanation. Alternatively, use MyNOI’s Local Cap Rate tool to get an idea of what the cap rates may be in your area.

When you’ve entered all the values you can, hit “Go to next step” to continue valuing your property in the commercial investing calculator.

investment property valuation calculator

 

Step 5:

investmenr property valuation calculator commercial investing calculator

In Step 5 of the IPV Calculator, we’ll perform a financial analysis and take a look at the debt you’ll be incurring by investing in a commercial property.

investmenr property valuation calculator

The first information you’ll be asked for is the down payment and loan amount.

The down payment is the amount of money a buyer needs to pay up front before they can sign the building contract. Most property owners expect some form of down payment as a way to prove buyers have the capital to afford making monthly mortgage payments. The loan amount is simply how much money you’ll be borrowing to purchase the property.

After the down payment and loan amount, you’ll fill in information on Interest Rate, Amortization Period, and Monthly Payment.

The interest rate is the percent charged for borrowing assets. If the bank loaned you money, they make a profit from it by charging you an interest rate based on the total still owed.

An amortization period is the amount of time it will take you pay off the debt with fixed monthly installments. The calculator will then crunch your expected monthly payments based off the total loan and how long you will be paying it off. The finished Investment Property Valuation Calculator report will detail how much you will have left to pay off every month.

The final slots for Step 5, Annual Debt Service and Debt Coverage Ratio (DCR), are automatically calculated for you if all the above information has been filled out.

investmenr property valuation calculator

Your annual debt service is simply how much money you will need to generate yearly to cover both your repayment loans and the interest on top of them. The debt coverage ratio is determined by dividing the NOI by the debt service. Or to put it simply, how much you’ll be making by how much you’ll owe. Typically, a bank with require a DCR of 1%> before loaning you any money, as that signifies your property will generate a positive cash flow.

When you’ve entered all the values you can, hit “Go to next step” to continue valuing your property in the commercial investing calculator.

investment property valuation calculator

Step 6:

How to Use the Investment Property Valuation Calculator commercial investing calculator

In the sixth step, investors will examine the cash flow of their property. It’s a short step that asks buyers to enter or estimate the average percentage growth of their income and expenses in order to help you better understand the long-term health of your property.

How to Use the Investment Property Valuation Calculator

Step 6 is the final section before your ten-year report is calculated by the commercial investing calculator. In this phase, we’ll focus on the estimated annual growth of your income and expenses.

investment property valuation calculator

As time goes on, it’s likely the income and expenses your building generates will grow. To ensure you receive an accurate ten-year forecast, it’s necessary to know how much each will be growing by. Enter the best estimation of growth you have into the proper boxes. If you’re unsure of what the rate may look like, contact a local broker and ask for the numbers on similar properties in the same sector and area.

The Cap Rate at Sale box will automatically populate itself based on the information you’ve given in previous sections. If you need a reminder of what cap rate is, read our article.

When you’ve entered all the values you can, hit “Go to next step” to see your ten-year property forecast report.

 

investment property valuation calculator

Step 7:

Investment Property Valuation Calculator commercial investing calculator

The final step of the IPV Calculator is a summation of everything you’ve entered before. Investors can see a ten-year forecast of their commercial property, along with information on their loans. This handy report can act as a loose guide on investments and provide you with a direction concerning where to put your money.

Investment Property Valuation Calculator

You’re familiar with many of these terms already from previous steps, but we’ll detail some of the new ones you may not recognize.

The Net Cash Flow is the money that remains after expenses and loan repayments have been taken out of your revenue.

Cash on Cash Return is a common way in the real estate industry of looking at your returns. It is calculated by dividing your cash flow by the amount of your total investment.

Principal Reduction is the amount of money you will have paid off that year toward your loan. With Cumulative Principal Reduction showing you the total sum of your payments so far.

The final report also lists how your loan payments will play out over the entire amortization period. Each month is detailed with how much you will be paying, the interest you’re paying on it, and the cumulative payments made so far.

Investment Property Valuation Calculator

To receive a PDF of the final report, click the “Email Me Results” and enter your email address.

From this final step, you can go back and edit any of the previous numbers you put in to see how they may affect the outcome of your property. Try lowering the interest rate to see how much .2% could save you over 30 years. Or experiment with rent prices to find the happiest medium between satisfied tenants and sufficient cash flow.

Thank you for your interest in the IPV Calculator. We hope you find it useful for all your commercial real estate needs!

To learn more about the team behind the commercial investing calculator, visit RealLaunch.com.

Download the commercial investing calculator tutorial.

How to Use the Investment Property Valuation Calculator: Step Seven

investment property valuation calculator

Yesterday, myNOI covered Step 6 of the Investment Property Valuation Calculator (IPV). In the final step, investors can see a ten-year forecast of their commercial property, along with information on their loans. This handy report can act as a loose guide on investments and provide you with a direction concerning where to put your money.

Step 7:

Investment Property Valuation Calculator

The final step of the Investment Property Valuation Calculator is a summation of everything you’ve entered before. The result is a downloadable report that lays out the ten-year estimated cash flow for your property based on the information given.

Investment Property Valuation Calculator

You’re familiar with many of these terms already from previous steps, but we’ll detail some of the new ones you may not recognize.

The Net Cash Flow is the money that remains after expenses and loan repayments have been taken out of your revenue.

Cash on Cash Return is a common way in the real estate industry of looking at your returns. It is calculated by dividing your cash flow by the amount of your total investment.

Principal Reduction is the amount of money you will have paid off that year toward your loan. With Cumulative Principal Reduction showing you the total sum of your payments so far.

The final report also lists how your loan payments will play out over the entire amortization period. Each month is detailed with how much you will be paying, the interest you’re paying on it, and the cumulative payments made so far.

Investment Property Valuation Calculator

To receive a PDF of the final report, click the “Email Me Results” and enter your email address.

From this final step, you can go back and edit any of the previous numbers you put in to see how they may affect the outcome of your property. Try lowering the interest rate to see how much .2% could save you over 30 years. Or experiment with rent prices to find the happiest medium between satisfied tenants and sufficient cash flow.

Thank you for your interest in the Investment Property Valuation Calculator. We hope you find it useful for all your commercial real estate needs!

To learn more about the team behind the IPV Calculator, visit RealLaunch.com.

How to Use the Investment Property Valuation Calculator: Step Six

investment property valuation calculator

Las week, myNOI covered the first five steps of the Investment Property Valuation Calculator (IPV). In the sixth step, investors will examine the cash flow of their property. It’s a short step that asks buyers to enter or estimate the average percentage growth of their income and expenses in order to help you better understand the long-term health of your property.

Step 6:

How to Use the Investment Property Valuation Calculator

Almost there! 

How to Use the Investment Property Valuation Calculator

Step 6 is the final section of the Investment Property Valuation Calculator before your ten-year report is calculated. In this phase, we’ll focus on the estimated annual growth of your income and expenses.

investment property valuation calculator

As time goes on, it’s likely the income and expenses your building generates will grow. To ensure you receive an accurate ten-year forecast, it’s necessary to know how much each will be growing by. Enter the best estimation of growth you have into the proper boxes. If you’re unsure of what the rate may look like, contact a local broker and ask for the numbers on similar properties in the same sector and area.

The Cap Rate at Sale box will automatically populate itself based on the information you’ve given in previous sections. If you need a reminder of what cap rate is, read our article.

When you’ve entered all the values you can, hit “Go to next step” to see your ten-year property forecast report.

investment property valuation calculator

Come back tomorrow when we detail the final step of the Investment Property Valuation Calculator!

How to Use the Investment Property Valuation Calculator: Step Five

investment property valuation calculator

Yesterday, myNOI covered Step 4 of the Investment Property Valuation Calculator (IPV). In the fourth step, investors found an estimated valuation of their commercial property by combing the income withe expenses. In Step 5, we’ll examine the debt taken on through your investment and the monthly payments you’ll make on your commercial real estate.

Step 5:

investmenr property valuation calculator

In Step 5 of the IPV Calculator, we’ll perform a financial analysis and take a look at the debt you’ll be incurring by investing in a commercial property.

investmenr property valuation calculator

The first information you’ll be asked for is the down payment and loan amount.

The down payment is the amount of money a buyer needs to pay up front before they can sign the building contract. Most property owners expect some form of down payment as a way to prove buyers have the capital to afford making monthly mortgage payments. The loan amount is simply how much money you’ll be borrowing to purchase the property.

After the down payment and loan amount, you’ll fill in information on Interest Rate, Amortization Period, and Monthly Payment.

The interest rate is the percent charged for borrowing assets. If the bank loaned you money, they make a profit from it by charging you an interest rate based on the total still owed.

An amortization period is the amount of time it will take you pay off the debt with fixed monthly installments. The calculator will then crunch your expected monthly payments based off the total loan and how long you will be paying it off. The finished Investment Property Valuation Calculator report will detail how much you will have left to pay off every month.

The final slots for Step 5, Annual Debt Service and Debt Coverage Ratio (DCR), are automatically calculated for you if all the above information has been filled out.

investmenr property valuation calculator

Your annual debt service is simply how much money you will need to generate yearly to cover both your repayment loans and the interest on top of them. The debt coverage ratio is determined by dividing the NOI by the debt service. Or to put it simply, how much you’ll be making by how much you’ll owe. Typically, a bank with require a DCR of 1%> before loaning you any money, as that signifies your property will generate a positive cash flow.

When you’ve entered all the values you can, hit “Go to next step” to continue valuing your property.

investment property valuation calculator

Come back Monday when we detail Step 6 of the Investment Property Valuation Calculator!

How to Use the Investment Property Valuation Calculator: Step Four

investment property valuation calculator

Yesterday, myNOI covered Step 3 of the Investment Property Valuation Calculator (IPV). In the third step, investors laid out the expenses of their properties and could easily see which areas were impacting their bottom line the most. In Step 4, we’ll combine income and expenses to find an estimated value of your commercial property.

Step 4:

investment property valuation calculator

In Step 4 of the Investment Property Valuation Calculator, you’ll focus on valuing your commercial real estate property. You’ll advance from this step with a better understanding of what your building is worth and an estimation of its Cap rate.

investment property valuation calculator

Before you begin, it’s useful to understand a couple terms. First Net Operating Income (or NOI) is a calculation used to determine the profitability of a property. NOI is determined by adding all revenue generated from the property (rent, parking, etc) minus all reasonably necessary operating expenses (insurance, repairs, etc.)

investment property valuation calculator

A Capitalization (Cap) Rate is a little more complicated to figure out. A cap rate is the rate of return anticipated for one year if the property was paid for in cash — it’s the ratio between the NOI and the property value. It is determined by evaluating the financial data of similar properties which have recently sold in a specific market. The cap rate calculation incorporates a property’s selling price, gross rents, non rental income, vacancy amount and operating expenses.

Generally, buyers are interested in properties with a higher cap rate, while sellers want their cap rate to be low. You can use the slider at the bottom of the page to see how the cap rate affects the value of your property. As the cap rate goes up, your property’s value goes down.

If you’d like to learn more about cap rates, read out article for a more comprehensive explanation. Alternatively, use MyNOI’s Local Cap Rate tool to get an idea of what the cap rates may be in your area.

When you’ve entered all the values you can, hit “Go to next step” to continue valuing your property.

investment property valuation calculator

Come back tomorrow when we detail Step 5 of the Investment Property Valuation Calculator!

How to Use the Investment Property Valuation Calculator: Step Three

investment property valuation calculator

Yesterday, myNOI covered Step 2 of the Investment Property Valuation Calculator (IPV), where investors examined the income of their commercial properties. Today, we’ll cover Step 3 of the Investment Property Valuation Calculator, where you’ll lay out what your buildings are costing you to maintain and own.

Step 3:

investment property valuation calculator

In Step 3, you’ll break down the expenses it takes to run and maintain your property. This will provide you with a better idea of how much each charge is cutting into your profit and where you could potentially save money.

investment property valuation calculator

There are typically two types of leases when dealing with commercial real estate, Gross Lease and Triple Net Lease (NNN). If a Triple Net Lease has been signed, the tenant agrees to take on the full extent of the building’s expenses. They will cover taxes, insurance, maintenance and nearly every billable item.

With a Gross Lease, it is the landlord who is responsible for paying the majority of the building’s expenses. The tenants pay a singular rate throughout the year.

Click here to learn more about the two types of leases.

investment property valuation calculator

As with income, we recommend you fill in as many details as possible for your building’s expenses. Every expense you input will lead to a more comprehensive view of your property and allow you to more strategically outline your future plans for it.

The IPV Calculator automatically creates fields for some of the most common expenses, but you are free to create delete or create your own depending on your property’s unique needs.

investment property valuation calculator

If you are unsure of your property’s various expenses, there is the option to enter the total lump sum of your building’s cost. This will result in a less detailed, but still functional final report.

investment property valuation calculator

When you’ve entered all the expenses you know, hit “Go to next step” to continue valuing your property.
investment property valuation calculator

Come back tomorrow when we detail Step 4 of the Investment Property Valuation Calculator!

How to Use the Investment Property Valuation Calculator: Step Two

investment property valuation calculator

Yesterday, myNOI explained the first step in using the Investment Property Valuation (IPV) Calculator. Investors explained what type of property they’re selling, and what they’d like to do with it. Today, we’ll cover Step 2 of the Investment Property Valuation Calculator, where investors will examine the money their properties generate.

Step 2:

The second step in the Investment Property Valuation Calculator is all about income! Here, you’ll discover how much Gross Income your property is bringing in. Gross Income is the total amount of money you are making, before deducting taxes and expenses.

It’s important to enter in as much data as you have on income, including individual tenant’s rent. The more information you can provide, the more in-depth analysis you’ll have of your property’s worth.

If you do not have the information readily available, or you have many, many tenants, you have the option to skip individual entries and enter the single lump sum of your building’s income.

 

Feel free to enter income number you most readily know. If you enter in your total monthly income, the IPV Calculator will automatically calculate your annual income. This also works in reverse if you enter your annual income first.

Property Income refers to “income received by virtue of owning property.” The three forms of property income are rent—received from the ownership of natural resources; interest—received by virtue of owning financial assets; and profit—received from the ownership of capital equipment.

The Property Square Footage is the amount of space your property takes up. A square foot is defined as the area of a square with sides of 1 foot in length.

investment property valuation calculator

Vacancy Rate can be tricky. The vacancy rate refers to “the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time.” For example, if you have a four unit apartment, and a tenant moves out of one unit, your vacancy rate is 25%.

For the IPV Calculator, we recommend entering in the average property’s vacancy rate in your market. This number can swing drastically in different directions based on your property type and location, so expect to do some research. If you’re unsure, contact a local commercial real estate broker. They will be happy to help you out!

When you’ve entered all the figures you can, hit “Go to next step” to continue valuing your property.

investment property valuation calculator

 

Come back tomorrow when we detail Step 3 of the Investment Property Valuation Calculator!

How to Use the Investment Property Valuation Calculator: Step One

investment property valuation calculator

 

investment property valuation calculator

The Investment Property Valuation Calculator is an invaluable tool for investors and brokers alike. When used effectively, the IPV Calculator can help you plan ahead with your commercial property investments. An in-depth reading of the results can reveal when the best time to sell would be, areas where building expenses could be trimmed back, and many other insights that will create the best return on your commercial investment.

Over the next week, myNOI will detail each step of the process. You’ll learn what each section is designed to inform you of, what some of the uncommon terms mean, as well as how to use the results to best leverage your investment.

To begin, visit IPVcalculator.com

 

Step 1:

investment property valuation calculator

The IPV Calculator relies on a short, seven step process to supply you with a ten-year plan for your commercial property. To start, answer the question, “What type of investor are you?”

investment property valuation calculator

Are you looking to buy or sell your property?

Next, you’ll specify the Property Type of your building. If you’re unsure, you can learn more about the five general property types here.

investment property valuation calculator

Different commercial real estate property types require different information to give you an accurate reflection of their worth. So it’s important to specify the correct type! The expenses for a multifamily apartment will be very different than those of an office property. As will the type of lease you have established with the tenants.

That’s it for Step 1 of the IPV Calculator! Pretty simple. When you’re ready for Step 2, hit “Go to next step” to continue valuing your property.

investment property valuation calculator

Come back tomorrow when myNOI details Step 2 of the Investment Property Valuation Calculator!