As a commercial real estate investment advisor, I evaluate every property’s potential return on investment for my clients.  I have found out that some people do not know where to start. Location, accessibility, demographics are some important factors but these are not enough.  Qualitative characteristics of a property seem to play a major role but let us remember to look at the numbers to have a good picture of what we are going to invest in.

There is an equation I call the Commerial Real Estate Stack.  This is a basic of measurement model which allows an investor to look at an investment property and convert it to a mathematical model so that it can be compared with other investment options.

This mathematical equation will allow the investor to determine the Net Operating Income (NOI) of a property. Here are key terms:

Gross Potential Income (GPI)

The Gross Potential Income of a commercial property is the best case scenario of what it can generate in rent. If a property can charge $2,000 per month, then the GPI would be $2,000 x 12 = $24,000 per year.

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.