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“Drinking from the Fire Hose Investment Basics from A to Z”

“Drinking from the Fire Hose Investment Basics from A to Z”. Wifi password : spacematters. Why Todd?. Analyzed thousands of deals totaling over 11,000 units and $2.5B Teach these concepts for CCIM institute Over 4,000 students in a dozen countries

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“Drinking from the Fire Hose Investment Basics from A to Z”

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  1. “Drinking from the Fire HoseInvestment Basics from A to Z” Wifi password : spacematters

  2. Why Todd? • Analyzed thousands of deals totaling over 11,000 units and $2.5B • Teach these concepts for CCIM institute • Over 4,000 students in a dozen countries • I use these techniques on my properties and for my clients • www.toddclarke.com • www.nmapartment.com

  3. Do investors own commercial real estate?

  4. Are you here today? 1. Your name2. Specialty3. Trade area4. Hope to get from today

  5. Goals for today: • Discover major investment benchmarks • GRM (Gross Rent Multiplier) • CAP Rate (Capitalization rate) • Cash on Cash • IRR unleveraged • IRR with leverage • IRR after tax • Look at real estate the same way investors, wall street, lenders and capital markets • Understand relationship between risk and return • Match investor needs with deal parameters

  6. Major benchmarks for measuring investment real estate • GRM (Price/Annual Rents) • CAP Rate (NOI / Price) • Cash on Cash (CBFT / Down payment) • IRR (NPV) • Effective Tax Rate • Better than stock market (cash on cash and leverage) • Cash flow (vs. other investments) • Depreciation / tax benefits • Principal reduction on loan • Appreciation

  7. What do we tell out clients • As to why they should own investment real estate? • Cash flow • Potential for Appreciation • Tax benefit • Leveraged benefit • Leveraged tax benefit

  8. Load the spreadsheet • iPad • Or laptop • Excel or Numbers

  9. Start with the Blank version

  10. Citadel Apartments

  11. 5 years of operations

  12. + Sale opportunity at EOY 5

  13. Investors tax rate drops from 25% to 21% Announcing…the results

  14. Source for inputs: • ULI NM – Annual CAP rate survey • Apartment Association of NM – rent survey • IREM National – Annual expense survey • Attend industry events (like AANM annual outlook)

  15. Have you heard? Walking is in • Last season • Raised profile • Fictitious ?

  16. The first Apartment Association nationally Rent Survey with walk score summary

  17. Results by Walk Score – 24% premium for walkability

  18. Results by Bike Score – 24% premium

  19. Results by Transit Score – 26% premium in rents per sf

  20. Rents by Submarket

  21. Millennial Market Leaders Brand new one bedroom units - $1,195 – highest one bedroom rents in ABQ Tour – 9/4/2014

  22. Millennial Market Leaders Silvermoon Lodge – 1 parking space per 4 units – under construction, prelease ahead of schedule

  23. Market Leaders - Downtown $1.38-$1.83/sf Amenities: - Location - no parking - mixed use NEC 6th/Silver - small community - recent renovations 700 2nd SW - $1.63-$1.93sf - New community - small units - lots of communal space Friendly

  24. Why is $1.35 to $1.85 sf good? • At $2.00/sf we can afford steel construction • Steel = high rise development (high for ABQ is mid in most cities) • We finally have the zoning (downtown, uptown) to support high rise (and new UDO)

  25. Interested in more? Sign up for CCIM Masters degree in commercial real estate www.ccim.com Online and in classroom courses 160 hours of training to designation

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