Managing Broker, Leanne Goff, has been working on her Masters Degree in Real estate through REALTOR University. Her final days of the two year program are almost complete. She has been recapping the experience by blogging for the university. She recently described her work in the class, Real Estate Finance and Investments.
The information in this course showed Leanne how to break down the financial calculations important in commercial real estate and investing. Her knowledge in this class has been put to work directly by assisting buyers in the purchase of multi-unit residential properties. Since the beginning of the class Leanne has assisted in the purchase of a 16-plex apartment complex as well as an 8-plex. The interesting part about the 8-plex was that there were two units with units in each individually addresses building. This allowed the Buyers to use a residential loan to buy the two properties, whereas the 16-plex required a commercial loan.
Each property requires the same due diligence. Investigating the Net Operating Income (NOI) takes into account the amount of revenue each unit returns versus the expense associated with running the buildings. This information is obtained by evaluating the leases for each unit to see the actual revenue being produced. The Seller is required to produce their tax returns, as well. The tax returns show the actual revenue the Seller reported. For the Buyer, the cost of the loan or debt service needs to be evaluated to determine the before tax income after operating expenses. The last step is to apply the estimated tax expense to understand the potential revenue annually.
Please contact Leanne to have her put these calculations to work for you in the purchase of your next investment property. If you are looking for a single-family home that produces revenue, or a larger multi-unit complex she will be able to assist.