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Index
Cover
Contents
Title
Copyright
Dedication
List of Abbreviations
Introduction
Chapter 1: An Overview of the Problem, a Solution, and a Game Plan
The Problem
The Solution
Four Key Elements in the Solution
Concerns about the Solution
Acquiring the Skill Set to End the Cycle
A Game Plan to Achieve the Solution
This Book Is about Center B Properties
Chapter 2: The Basics
Gross Income: The Starting Point
Vacancy and Collection Loss: Gross Income Reducers
Operating Expenses and Net Operating Income
Fair Market Value and Capitalization Rate: What’s It Worth?
Gross Rent Multiplier
Value per Square Foot versus Reproduction Cost per Square Foot
Inverse Relationship between Cap Rate and FMV
Initial Determination of Value
Leveraged Return and Return on Equity
Cash Flow before Taxes (CFBT)
Reserves/Impound Accounts
Taxes and Insurance Impounds
Cap X, TIs, and Leasing Commissions
Devil in the Details: Over Simplified Analysis
Chapter 3: Detailed Financial Analysis
Gross Income
Vacancy and Collection Loss
Operating Expenses
Four Basic Types of Leases
Nonrecoverable Expenses
Time-Frame Assumptions
Static versus Active Analysis
Compounding
Rent Roll
Argus Ten-Year Discounted Cash Flow Model
Analysis Reflecting 100 Percent Occupancy
Reversion
Disposition Costs
The Time Value of Money: Present Value and Discounted Cash Flow
Net Present Value (NPV)
Internal Rate of Return (IRR)
Conclusions from Argus Analysis and the Hypothetical Facts
Analysis Reflecting a Large Vacancy after Purchase
Analysis Reflecting a Large Vacancy with a Tenant in Tow
Chapter 4: Lease Analysis
The Importance of Basic Lease Provisions
Twelve Key Economic Ingredients in a Lease
Frequently Negotiated Lease Provisions
Chapter 5: Real Estate Financing
Sixty to Eighty Percent of the Game
Types of Financing
What Is the Right Answer to Debt Structuring?
Seven Key Factors to Consider in a Real Estate Loan
Loan Underwriting
Cash-on-Cash Return
The Mortgage Loan Application
The Pitfalls of Mortgage Lending
Negotiable Points of a Loan
Chapter 6: Real Estate Taxation
Income Taxation
Real Property Taxation
Taxation in the Event of a Refinance
Taxation in the Event of a Sale
Installment Sale
Section 1031 Exchange
Chapter 7: Acquisitions and Dispositions
Focus on Specific Property Types in Specific Geographic Locations
Establish Buying Criteria
Acquisition Philosophy
Governmental Impact
Initial Screening
The Purchase and Sale Agreement
Building a Team
Due Diligence
Dispositions
Chapter 8: Case Studies
Problem Number 1
Problem Number 2
Problem Number 3
Problem Number 4
Problem Number 5
Problem Number 6
Problem Number 7
Chapter 9: Development or Rehabilitation (Build to a 12 Percent Yield)
The 10 Phases of a Construction or Rehab Project
Assessing a Construction Project
Developer as Conductor
Does the Project Hit Your Minimum Yield?
Argus Developer
Feasibility or Market Study
The Composition of a Feasibility Study
Residual Land Value
Preleasing
Equity and Financing
Mechanics’ Liens
Liability under the Construction Loan
Design and Construction Drawings
Governmental Approvals
Covenants, Conditions, and Restrictions (CC&Rs)
Ground Lease Restrictions
Construction of Improvements in a Ground-Up Development
Inspections
Insurance
Decisions, Decisions, Decisions
Communication, Communication, Communication
Graphic Time Line
Project Operating Costs
Lender’s Disbursement Form
Change Orders
Rehabilitation Project
Construction of Improvements in a Rehab Project: Decisions, Decisions, Decisions
Rehab Project: Communication, Communication, Communication
Summary
Chapter 10: Marketing, Leasing, and Management
Definition of Marketing, Leasing, and Management
Marketing
Leasing
Strategy
Management
Management as a Business
Conclusion
Chapter 11: Partnership Structuring and Deal Restructuring
Partnership Structuring
Securities Issues
Fifteen Key Structuring Issues
Debt Restructuring
Borrower’s Proposed Terms
Lender’s Counterproposal
Chapter 12: Keeping the Money
Planning
Fractional Interests
Estate Planning Checklist
Acknowledgments
About the Website
About the Author
Index
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