Archive for the ‘Real Estate’ Category
Real Estate Industry
The Real Estate industry in the recent past has been synonym to success. The Real Estate industry has been growing in the tough times and supported the Indian economy to an extent that it today alone stands at the second position in Indian Economy. With large revenue of twelve million dollars the Real Estate industry today is estimated to further expand at the rate of thirty percent per annum. With such huge growth facts and figures, the Real Estate Industry has now become a hub for all the aspiring professionals and attracts a large investment either long term or short term. The Real state sector offers various services to the clients and to other industries that revolve around the property. It seems to be have not possible if with the out the Real Estate sector that we could enjoy the lavish apartments and excellent buildings for the various income groups that we notice walking down the street today. It is further the bless of the Real Estate Industry that we enjoy such marvelous Infrastructure, as the Infrastructure and the Real Estate Industry goes hand in hand making the present India a viable destination for growth and prospects of growth. The Real Estate Industry being the second largest industry in the Indian economy salutes and grants an equal share of importance to the related industries who have contributed in the making the Real Estate industry a promising industry for the Indian Economy to Rely on. Hence all the aligned industries like Interior Designing, Architecture, Builders, Manufacturers and other related fields are granted an equal importance and respect while one can talk about the Real Estate sector alone.
The Real Estate industry has contributed to the growth of the Indian economy without any doubt but on the same hand they have also contributed to the growth of an individual by supporting them with the excellent jobs in the sector and prompting the knowledge and expertise of the existing key players in the market. Hence the Real Estate industry has played a dual role in the growth factor as well apart from maintaining a large growth and development rate of India. It is the real Estate Industry that has shaped previous India to a new aged modern India providing excellent facility with the high technology mechanism with the vision of growth of the sector with the growth of India. Today we find various sectors associating with the Real Estate that are partly or completely responsible to work hand in hand with the Real Estate industry. To conclude one can say that the Real Estate industry is blessed in the modern age to not only the human kind but also to the nation. With tremendous growth and development it has signified itself to be a potential sector that can grow and provide support to one and all with the services and development in various methods and factors. The Real Estate industry aiming to gain the top position would develop in the future economy time with aim to provide home by 2020, which is also now an aim for largest year long festival of Real Estate, The Real India Fest.
Tags: Indian Economy, Related Industries, Walking Down The Street
How to Value Commercial Real Estate
One of the first questions you’ll ask yourself when you are looking at a new property to purchase is: What is this property worth? That is a different question then: How much can I pay? And it’s still different then: What can I get this property for? But all of those questions need answers before you put in an offer to purchase a new property.
How an investor chooses to value a property can depend on the size of the property or the sophistication of the purchaser. We rely on the simple methods, both because we are new to commercial investing, and because we’re looking at small properties. But, simple doesn’t mean less reliable or less accurate when it comes to commercial valuation.
Essentially, there are three ways to value a commercial property:
1. Direct Comparison Approach
2. Cost Approach
3. Income Approach (which includes the DCF method and the Capitalization Method).
The direct comparison approach uses the recent sale details of similar properties (similar in size, location and if possible, tenants) as comparables. This method is quite common, and is often used in combination with the Income Approach.
The cost approach, also called the replacement cost approach, is not as common. And it’s just what it sounds like, determining a value for what it would cost to replace the property.
The third, and most common way of valuing commercial real estate is using the income approach. There are two commonly used income approaches to value a property. The simpler way is the capitalization rate method. Capitalization Rate, more commonly called the “Cap Rate”, is a ratio, usually expressed in a percent, that is calculated by dividing the Net Operating Income into the Price of the Property. The cap rate method of valuing a property is where you determine what is a reasonable cap rate for the subject property (by looking at other property sales), then dividing that rate into the NOI for the property (NOI is The Net Operating Income. It’s equal to income minus vacancy minus operating expenses). Or, you could figure out the asking cap rate of the property by dividing the NOI by the asking price.
For example, if a property has leases in place that will bring in, after expenses (but not including financing) an NOI of $10,000 in the next year and comparable properties sell for cap rates of 6% then you can expect your property to be worth approximately $166,666 ($10,000/.06 = $166,666). Or, said another way, if the asking price of a property is $169,000, and it’s NOI is estimated at $10,000 for the next year, the asking cap rate is approximately 6%.
Where this gets tricky is when properties are vacant, or where the leases are set to expire in the upcoming year. This is often when you are forced to make some assumptions. (We’ll save how you deal with this for another day.)
The other income method is the DCF method, or the Discounted Cash Flow method. The DCF method is often used in valuing large properties like downtown office buildings or property portfolios. It’s not simple, and it’s a bit subjective. Multiple year cash flow projections, assumptions about lease rates and property improvements and expense projections are used to calculate what the property is worth today. Basically, you figure out all of the cash that will be paid out and all of the cash that will be brought in on a monthly basis over a specific period of time (usually the time you plan to hold the building for). Then you determine what those future cashflows are worth today. There are computer programs like Argus Software that help in these types of valuations because there are many variables and many calculations involved.
For the small investors, like us, using a combination of comparable property sales and income valuation using cap rates, will provide a reliable valuation. The real issue is convincing the seller that they should sell based on today’s income and today’s comparable properties. In the case of a mixed use commercial building we just tried to buy, the seller was pricing their property based on assumptions that leases will renew in the next 6 months at substantially higher rates and that the area of the property will continue to improve making the property more desirable. Unfortunately, we don’t buy properties hoping for appreciation. We buy properties today because the property will put more money in our pocket each month then it takes out, and the property fits within our investing goals.
Tags: Commercial Real Estate, Income Approach, Investing
Planning for Playa del Carmen Retirement – Ownership Options
If you are planning ahead for your Playa del Carmen retirement, there are number of methods of property ownership you can use to help you make this purchase financially feasible. The following are a few to consider.
Mortgage – For the past few years, mortgages have been available from Mexican banks, such as Scotiabank Mexico. The advantages and disadvantages are just about the same as back home, but banks here require higher credit scores, more paper work, and a longer times for the qualification process. The advantage is that it allows to buy with financing, while leaving your home equity back in the U.S. or Canada in tact.
Seller/Developer Financing – This is an easier process, and sometimes there is little or no interest. These are, however, short term plans. It is necessary to use a “bank trust in guarantee” to make this official, giving you legal ownership of the property before paying out large amounts of cash.
Income from Rental – After obtaining a property, whether by mortgage or in cash, you can rent out the property to cover expenses and even see an investment return, helping to build up your retirement savings. If you are going to use the property part time, you should consider vacation rentals, and plan your visits during low seasons. A property walking distance to the beach or near Fifth Avenue, the main tourist street, is best for vacation rental. If you are not going to use the property, long term rental is another option, which brings lower monthly income, but is more consistent.
Buying a second Property – There are a few examples of owners who have gained enough income from their first condo to put this towards acquiring a second. This means that when retirement comes, not only will their savings be in tact, but they will have an ongoing income to increase their lifestyle. This option takes a fairly high amount of dedication and financial discipline, but is entirely feasible.
On the whole Playa del Carmen retirement will allow you to live less expensively. Just about everything, from food in the grocery store to property taxes and utility bills tend to be very low. High-quality health care and large ticket purchases will also show substantial savings, often over 50% of the cost of the same product in the U.S. Being able to incorporate your Playa del Carmen property purchase into a feasible financial plan like the one’s mentioned above will help you enjoy your retirement savings to their fullest.
Tags: Bank Trust, Part Time, Planning Retirement