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Commerical Real Estate Demand and Factors
Are the rents at market levels? Are the expenses in line? In other words, is the owner spending too much money and doesn't even know it? Are there any ways that I can add additional income to the property? Are there small improvements that I can do to the property that could substantially increase the value and/or increase the rents that I could be receiving? Are there specific management strategies that I could use to increase the rent substantially in a short period of time? You see, it's all what you find underneath the surface. Most investors will look at a property at the surface and then move on, discounting it because they don't think it has any real possibility. Don't make that mistake, especially if you have a gut feeling about the property. Look past the income and the expense information that you were provided. Answer the questions that I just went over with you. Once you do that, many times you'll find it's probably an average property that you may want to pass on, but there will be times that you'll find out that it has huge potential in areas that you did not foresee on the surface.
What you'll find in your marketplace when it comes to analyzing apartments is you can use a quick rule of thumb method of analyzing a property to give you an idea of whether you think of it may or may not be worth pursuing. That is the gross rent multiplier. How do you get the gross rent multiplier and what is it? The gross rent multiplier is simply the asking price divided by the annual gross rents. For example, if I have an apartment property where the owner is asking $300,000 and my annual gross rental income is $60,000, I would take $300,000 divided by $60,000 and I would get five. So, my gross rent multiplier would be five. After you've taken a look at quite a few apartment properties, you'll get a good feel of what a good gross rent multiplier would be and what a profitable gross rent multiplier would be.
For example, when I'm working with apartment property investors, I encourage them to look for gross rent multipliers in the four, five and six ranges. Anything over the six ranges sends out a red flag and tells me that we need to look at this really hard because there could be some possibilities; however, it also could be overpriced.
About the Author commerical real estate Special offer to help you make it in the commercial real estate world right now.http://www.commercialprofitblueprint.com Jacquelyn Donner
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