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Criteria for making decision

Criteria for making decision. Making a decision. Rules-of-thumb: Market Multipliers RPF, SPPF, OER Income Multipliers  GIM, NIM, BTCF ATCF Rates of return  OCR, EDR, ATR Traditional appraisal: Market Comparison Approach Cost Approach Income Approach. Market Multipliers.

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Criteria for making decision

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  1. Criteria for making decision

  2. Making a decision • Rules-of-thumb: • Market Multipliers RPF, SPPF, OER • Income Multipliers  GIM, NIM, BTCF ATCF • Rates of return  OCR, EDR, ATR • Traditional appraisal: • Market Comparison Approach • Cost Approach • Income Approach

  3. Market Multipliers • Rent per square foot (RPF) • Determine Rent by collecting market data • The comparables are examined in terms of • Date sales • Lease terms • Lease Options • Physical Characteristic: Age, Location, Size • Tenant Rating • Justify the proper lease using the most comparable.

  4. Market Multipliers: Comparisons • Sales Price per square foot • determine the price of the property based on its size (area) • Comparison is required based on the previous slide. • Sales Price per square foot: SPPF • Gross Income Multiplier: GIM • Operating Expense Ratio: OER

  5. Market Multipliers Comp 1 Comp 2 Comp3 Rent per square foot (net) $15.60 $14.20 $14.25 (Income at sales / Net leaseable area) Rent per square foot (gross) $14.80 $14.10 $13.85 (Income at sales / Gross area) GIM 5.11 4.90 4.88 (Sales price / Income at sales) OER 40% 38.5% 38% (Operating expense at sales / Effective Gross Income)

  6. Homework • Make the comparison Analysis for rental comparables. Design your sheet. Then estimate the market rent and rates used for analyzing the investment • Forecast NOI under the existing leases for 6 years. Detail your assumption (if any) • Calculate the cash flow from selling the building at the end of year 5.

  7. Constructing a debt service table • Mortgage Constant: MC = i/m 1 - 1 1 + i nxm Loan principle $1,000,000 bath at 7% per annum 25 yrs. Monthly compounding. What is the monthly payment Monthly payment = Principal x MC

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