To be a knowledgeable commercial real estate investor requires having a solid grasp of the numbers associated with real estate investing. There are at least six different types of calculations an investor needs to fully understand. Commonly, I find that investors are very knowledgeable in two or more of these categories, but rarely all six.
The Six Types of CRE Calculations
- How is commercial real estate valued?
- How do you determine the loan amount based on a lender’s underwriting parameters?
- How do you calculate a property’s cash-on-cash return?
- How does leverage impact a property’s cash-on-cash return?
- How does loan amortization impact your investment?
- What minimum financial requirements do lenders require of borrowers in order for them to be approved for a loan?
Want to find out how good you are with the numbers? Take my 10 question quiz. This is not some namby-pamby quiz. The average quiz result is 4 correct answers out of 10. But the quiz will give you a good understanding of how well you know the numbers associated with CRE investing. For those questions you miss, I’ll explain in detail how these commercial real estate formulas are calculated. Common on. Take the quiz. I dare you. 😊