Wednesday, September 11, 2013

Cap Rate Calculations Today via CCIM Institute

Since the market crash five years ago, CCIMs and other commercial real estate professionals have been asked far too often, “What is it worth?” With a paucity of sales from which to extract investment benchmarks, many of us were limited to guesswork, mathematics, or both. To add to our challenges, credit remained tight, forcing a retreat of some lenders from commercial real estate all together.

When financing was not at issue, some of us turned to mathematics to explain the market in a period without empirical transactions. (See “Cap Rate Calculations,” Sept./Oct. 2009 CIRE) But as we head deeper into recovery and lenders return to the market, let’s take a closer look at how lenders might “back of the envelope” or underwrite real estate today by using the Gettel formula to determine capitalization rates. The information may help us close more escrows in our efforts to understand the plight of lenders.

Read more...Cap Rate Calculations Today | CCIM Institute

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