From Part 1, making a blunder on the operating expense ratio seems like no big deal because it doesn’t affect the cash-on-cash return or the debt coverage ratio (DCR). Yet I baited you a little bit to get your interest piqued by saying this is far from true. Allow me to explain the methods of . . . → Read More: How the Credit Crisis Collapsed Commercial Real Estate – Part 2 of 3
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My recent post on Cap Rate Appreciation raised an eyebrow. In it, I show the difference in the cash on cash (a.k.a. first year return) for a purchase of commercial real estate without appreciation expectations and one with a 4 percent appreciation expectation. There was one glaring issue that I could not explain within the context . . . → Read More: How the Credit Crisis Collapsed Commercial Real Estate – Part 1 of 3 |
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How the Credit Crisis Collapsed Commercial Real Estate – Part 3 of 3
In Part 1, I showed how a small change in the operating expense ratio (OER) has no effect on the debt coverage ratio or the cash-on-cash return. Rather than investigating the OER, I’ve heard some lenders will spend their time investigating rental comps to make sure the rental rate is accurate. Let’s see what effect that . . . → Read More: How the Credit Crisis Collapsed Commercial Real Estate – Part 3 of 3