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Commercial Real Estate Investments: How to Analyze Property Income – 4
Continued…
Annual Debt Service (ADS)
The ADS is the total of loan payments for the year. The annual debt service includes the principal and interest portion of the payment for all twelve months.
Cash Flow Before Taxes (CFBT)
Cash Flow Before Taxes is the amount of money realized by the investor for the year, whether positive or negative, before income taxes are computed.
Taxes (T)
This is simply the taxes you pay in connection to your property.
Net Income (NI)
This is your Net Income for the year after paying taxes. This is the amount of money realized after the payment of taxes.
Investment Cost (IC)
Investment Cost is the total amount of money you released to purchase that property including the professional fees and other expenses associated with buying that commercial investment property.
Return on Investment
When your Net Income added yearly reaches to a point that it surpasses your Investment Cost, then you have reached a Return on Investment.
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.
Commercial Office Buildings, Commercial Real Estate, How to Analyze Property Income, Property Management
Commercial Buildings, Commercial Office Building, Commercial Real Estate Investment, Commercial Real Estate Investment Advisory, Commercial Real Estate Investment Intelligence, Commercial Real Estate Investment Strategy, Financial Analysis Calculations, Property Income, Property Management
These are rates and ratios which can be useful in evaluating income property. But like all statistics, they can be confusing and misleading. Thanks for this post. I’ll wait for the next installment
Yield rates and cap rates are related, even though they are two different things. A yield rate is a rate of return on capital, like an interest rate. A cap rate is just a ratio (income divided by sale price). When a buyer expects income and property values to remain unchanged during the holding period (the time the buyer expects to own the property), the cap rate is equal to the yield rate. This is called capitalization in perpetuity.