Using Net Present Value (NPV) to Evaluate Real Estate Endeavors

Submitted by S. Laraby Identifying the best real estate investments is no easy task.  There are a myriad of different measures to reach an often hypothetical valuation.  Net Present Value (NPV) offers investors the best option to measure the present value of future cash flows of a project, while taking the discount rate into consideration.  In real estate, the opportunity cost, or the next best investment alternative is often used. Net Present Value Formula: The sum of the cash inflow/outflow discounted back to its present value.  Embark on projects with…

Interest Rate Increases Impacts Real Estate Mortgage Loan Proceeds

Submitted by A. Adams The mortgage interest rate market has a significant impact on loan underwriting and property valuation for  commercial real estate.  The United States has adopted an accommodative interest rate policy for the last eighteen months.  The Federal Reserve, based upon the United States weak economic results, has kept interest rates at historic lows. One of the vehicles that the Federal Reserve is using in its Quantitative Easing Program to keep interest rates low is to purchase $85 Billion in US Treasuries every month.  As noted on the…

Q2 Apartment Vacancy Report

Submitted by S. Laraby Recently released market data indicates that apartment demand has accelerated, growing to the highest level since late 2010.  Vacancy rates from Q1 to Q2 remained at 4.3% driving strong expectations for the multifamily segment. As Bill McBride of Calculated Risk Blog points out, “Over the last four quarters, national vacancies have declined by 50 basis points, a bit slower than last quarter’s year‐over‐year decline in vacancy of 70 basis points. This dynamic is somewhat to be expected ‐ as the market gets tighter and tighter, it…

Monitoring Your Online Reputation in Multi-Family Housing

Submitted by J.Debes Social media’s influence in the leasing process continues to gain popularity with growing user participation of ratings websites like Apartmentratings.com,  Yelp, Apartments.com, Google and others.   Customer reviews have become an integral part of most websites like Amazon.com and consumers rely heavily upon the opinions of other consumers when making purchase decisions.  Positive apartment community reviews will make your leasing prospects more inclined to lease while negative reviews (without responses from management) will likely deter prospective renters from leasing.  Multi-family managers should have operating procedures in place to…