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Real Estate Investment Liquidity Risk

February 23rd, 2021

During market downturns, access to capital dries up and buyers vanish. The liquidity risk is that property owners must place a discount on their property's value to sell it during market downturns.

Mitigants

Have adequate cash reserves and avoid excess leverage, so that the holding corporation is not forced to sell during a cyclical downturn when buyers vanish, and the only way to liquidate the ...

Real Estate Construction Risk Mitigation

February 22nd, 2021

Tender all work. Get a minimum of three quotes per job. Use construction contracts drafted by your law firm. Only use ensured and bonded contractors & tradespeople and have your law firm review their insurance policies. Avoid cost-plus contracts, only use fixed-price contracts. Construction contracts should incentivize early project completion.

Environmental Risks in Real Estate Investments

February 21st, 2021

Mititgants for dealing with environmental risks factors in real estate investing 

Conduct a phase 1, & phase 2 environmental report if necessary, during the acquisition due diligence period. In older buildings the implementation of asbestos and lead mitigation procedures is prudent.


Present Value of a Level Annuity

February 15th, 2021

Measuring the Time Value of Money is vital to any financial investment decision. Many professionals, both in and out of the real estate industry, use this calculation before jumping into a new venture. The use of the present value of a level annuity calculation helps professionals evaluate the potential value in an action, investment or other financial decision. The calculation also helps dec ...

Lease Types and Rent Equivalencies

February 14th, 2021

Gross leases: Gross leases are also known as full-service leases, in which the landlord pays all operating expenses including electricity, gas, cleaning, security, landscaping, and elevator, as well as waste removal and recycling. You might find this type of lease in multi-unit and single-unit office and industrial properties although in the Canadian market gross commercial leases are extreme ...

Private Vs. Public Markets

February 12th, 2021

Understanding the difference between private and public markets is a useful tool in evaluating real estate transactions. Public markets are those in which small homogeneous units of ownership trade over a public exchange (such as the stock market). They are highly liquid and transaction prices are transparent to the public. In contrast, private markets are those in which assets are sold bet ...

Replacement Cost Rent

February 11th, 2021

Replacement Cost Rent (RCR) is a tool that calculates replacement cost rent based on development cost inputs and capitalization rate inputs. A prospective developer could use this to evaluate the feasibility of a development site. The developer could also use this to calculate the highest and best use of a property. The developer would compare the replacement cost rent output with the actual ...

Why read the annual ULI Emerging Trends in Real Estate?

February 10th, 2021

The Annual Urban Land Institute’s Emerging Trends in Real Estate publication is a superior information source that provides invaluable market data for industry professionals. The sector-specific ULI annual report covers U.S. and Canadian real estate markets, providing in-depth market reports, tables and graphs that show interest rates, vacancy rates, cap rates, building starts and absorption ...

Net Operating Income (NOI)

February 9th, 2021

Net operating income (NOI) is what remains after one subtracts all the operating expenses on the pro forma. As simple as it sounds, NOI is perhaps the most important line item on a pro forma because it is used to calculate the cap rate, which determines the value of the property and DSCR. NOI does have its failings; specifically, it does not reflect account reserves for essential capital expe ...

Cash on Cash Yield

February 7th, 2021


The cash on cash yield is a return measure that expresses the cash flows paid to the investor of an income-producing property as a percentage of the asset’s value at the beginning of a certain period. This performance metric is used to measure periodic returns because it involves the cash flows paid back within a certain period of time. For example, the distributions of a real estate asset mi ...

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