commercial real estate

A cap rate, or capitalization rate, is an expression of return calculated as follows:

Net Operating Income/Purchase Price = capitalization rate

A cap rate does not take into accout return over time, as it only focuses on one year’s income.

As such, to only evaluate a real estate investment by looking at its cap rate is foolish. What does the 2nd year’s income look like? The 10th year’s income? Where are rental rates in place compared to market? Are you paying more or less than it costs to replace the building? What will cash on cash returns look like after the property is financed? What is the internal rate of return after a 5 or 10 year hold?

It’s your return on an investment over time.  It calculates the present value (ie the value today) of cash coming to you or leaving your pocket in the future.

In the case of evaluating a real estate investment, you have to project cash flow for a period of time into the future to give yourself a series ofcash flows to use in your calculations.

Then, because a dollar today is worth more than a dollar tomorrow, you discount the future dollars. The farther into the future, the bigger the discount.

IRR calculations are subject to big time manipulation in negotiations. By changing the sale price at the end of the analysis you can drive the IRR up or down dramatically.

Take a class from the CCIM Institute — on line or in person — to learn how to calculate an internal rate of return. Or just use Excel…but then you’ll never really understand how it works.

NAI KLNB is pleased to offer for lease 6500 to 8500 sf of office/warehouse space available in attractive business complex in capitol heights.

attractive entrances and office in front; warehouse with loading in back.

Email or call Alan Coppola at 443-574-1404 for more information or a tour.

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NAI KLNB is pleased to offer attractive I-2 zoned space in Beltsville, Maryland that features retail exposure!

Suites are available from 3200 square feet and up. 18′ clear ceilings.

Great for users with a an industrial/warehouse use but that requiring retail exposure.

Email or call Alan Coppola at 443-574-1404 for more details.

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KLNB is pleased to offer for sale this 46,800 square foot office/warehouse/production facility.

Currently used as a granite and marble fabrication and distribution facility, it features two overhead cranes (5 ton and 1 ton).

There is land for additional parking or expansion. The roof was replaced in 200. Lots of power, 7 docks and a drive in and 5,400 square feet of office finish.

Great access to DC and the Beltway via Route 50.

Email Chris Kubler for more information.

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In a rather humorless industry, I’ll take what I can get.

A REIT local to Washington DC to check out: dynamite yield and frankly our area is fairly insulated from the national distress:First Potomac Realty Trust (NYSE:FPO): throwing off 7.4% today. I bet I touted this one before, didn’t I?

Owner can sell warehouse space from 3,000 square feet up to 35,000 square feet.

Attractive, modern, tilt up construction at spectacular pricing. Make us an offer!

Rear loaded building with ample doors. Room for trailer storage!

Call Chris Kubler at 301-455-8840 for details.

Attractive one story office building for lease in lovely business park in Upper Marlboro.

Near the intersection of Central Avenue and Route 301.

Call Chris Kubler at 301-455-8840 for more details.

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Small bay warehouse currently leased month-to-month to three automotive tenants.

13,500 square foot building sits on a full acre so lots of parking.

Perfect to continue as an owner-occupied automotive building…or adaptive re-use to church, etc.

Call Chris Kubler at 301-455-8840 for more details.

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