So what is the actual difference between Vacancy and Credit Loss. Vacancy is the loss of potential income which is attributed to space in a building that is not leased. More simply put...this is empty space that could be making money for the landlord. Credit Loss, on the other hand, is the rent due that the landlord has not been able to collect due to a tenant's default. Again, simply put...rent that is owed that has not been paid.
This is one of the reasons that bankers will often use vacancy and credit loss in the formulas that is above a current vacancy rate. The apartment complex may have a vacancy rate of 5% for the last 3 years, but the banker may use a 10% vacancy and credit loss rate in order to cover any tenants that may be in place, but not paying the rent due.
Showing posts with label commercial real estate. Show all posts
Showing posts with label commercial real estate. Show all posts
Tuesday, December 18, 2007
Thursday, December 13, 2007
New Federal Funds Rate-Lowered Again
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.
Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.
In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.
http://money.cnn.com/2007/12/11/news/economy/fed_statement/index.htm
Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.
In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.
http://money.cnn.com/2007/12/11/news/economy/fed_statement/index.htm
Let's Define Net Operating Income (NOI)
The Net Operating Income (NOI) of a property is very simple to figure out. It is defined as follows:
Potential Gross Income=The total amount of money a property could make
-Vacancy and Credit Loss= subtract any empty space or tenants in place that haven't paid.
-Operating Expenses= subtract actual expenses on the property i.e. Utilities, Taxes, Insurance, maintenance, employees, etc. (this does not include the mortgage or income taxes)
=Net Operating Income
Potential Gross Income=The total amount of money a property could make
-Vacancy and Credit Loss= subtract any empty space or tenants in place that haven't paid.
-Operating Expenses= subtract actual expenses on the property i.e. Utilities, Taxes, Insurance, maintenance, employees, etc. (this does not include the mortgage or income taxes)
=Net Operating Income
Wednesday, October 24, 2007
Other ways to borrow money
A friend of mine recently told me to view a website called www.prosper.com. It is a site set up for people to borrow up to $25,000 from groups of people. Click on the picture below for an explanation of how the site works.
It is a site worth looking into further.
It is a site worth looking into further.
Monday, October 22, 2007
Partnerships, LLCs, and S-Corps...Oh My!!!
First of all let me give the legal disclaimer. This information just touches the surface of the information that you need in order to make a decision for your business. This blog is not your attorney or your accountant or your financial advisor. Please seek legal and tax advice before moving forward with your business planning decisions.
This information is courtesy of the site www.squeezenet.com under their "handy facts" section, sub-section "business". It gives a basic description of the different types of legal business entities.
Corporation
Viewed as a legal, separate entity which can enter into contracts, incur debt, and does pay taxes separate of the owners' personal taxes. As a separate entity it offers some protection to the owners whose personal assets are considered separate of the corporation and therefore cannot be attached or accessed in the case of a suit or other settlement.
"C Corp" (or Regular Corporation) vs. "S Corp"
As described above a corporation is a separate entity recognized by federal and state law and therefore pays separate income taxes. An S Corp has liability protection much like a C Corp, but shareholders can pay income taxes in much the same way the owners/operators of a sole proprietorship or a partnership company does. As with anything dealing with "who pays which taxes" the laws and rules can be tricky. It is always a good idea to consult legal counsel when starting a new business of any kind.
Limited Liability Company (LLC)
Similar to a corporation in that the owners' have immunity from personal liability. An LLC differs from a corporation in a number of ways: it can be easier to set up and maintain from a paperwork/records standpoint, it does not pay separate income tax, and an LLC does not have stock.
Sole Proprietorship
This is by far the easiest type of business to set up but also the one that puts your personal assets at greatest exposure. Essentially, in a sole proprietorship, the business owner and the business are one and the same. The business owner and the business pay the same income taxes. By the same token though, if the business is sued or has some other ruling against it, the business owner's personal assets, whether they were used as part of the business or not, can be attached and appropriated to pay damages or debt. This is where, if you're not cautious, you can lose "the shirt off your back."
Partnership
A partnership is similar to a sole proprietorship in as far as personal liability and taxes go. The difference is that there is more than one owner. There are different types of partnerships. For example, a limited partnership (LLP) consists of a general partner who has management authority etc., and a limited partner who has perhaps given money or property (some financial asset) to the business but is not involved in the day-to-day running of the business. An LLP is a very complex arrangement, it is only allowed in some states and is limited to professionals such as doctors and lawyers who would not want to share in each others' liability but need some of the benefits a company can offer as opposed to private practice.
I hope you find this information useful.
This information is courtesy of the site www.squeezenet.com under their "handy facts" section, sub-section "business". It gives a basic description of the different types of legal business entities.
Corporation
Viewed as a legal, separate entity which can enter into contracts, incur debt, and does pay taxes separate of the owners' personal taxes. As a separate entity it offers some protection to the owners whose personal assets are considered separate of the corporation and therefore cannot be attached or accessed in the case of a suit or other settlement.
"C Corp" (or Regular Corporation) vs. "S Corp"
As described above a corporation is a separate entity recognized by federal and state law and therefore pays separate income taxes. An S Corp has liability protection much like a C Corp, but shareholders can pay income taxes in much the same way the owners/operators of a sole proprietorship or a partnership company does. As with anything dealing with "who pays which taxes" the laws and rules can be tricky. It is always a good idea to consult legal counsel when starting a new business of any kind.
Limited Liability Company (LLC)
Similar to a corporation in that the owners' have immunity from personal liability. An LLC differs from a corporation in a number of ways: it can be easier to set up and maintain from a paperwork/records standpoint, it does not pay separate income tax, and an LLC does not have stock.
Sole Proprietorship
This is by far the easiest type of business to set up but also the one that puts your personal assets at greatest exposure. Essentially, in a sole proprietorship, the business owner and the business are one and the same. The business owner and the business pay the same income taxes. By the same token though, if the business is sued or has some other ruling against it, the business owner's personal assets, whether they were used as part of the business or not, can be attached and appropriated to pay damages or debt. This is where, if you're not cautious, you can lose "the shirt off your back."
Partnership
A partnership is similar to a sole proprietorship in as far as personal liability and taxes go. The difference is that there is more than one owner. There are different types of partnerships. For example, a limited partnership (LLP) consists of a general partner who has management authority etc., and a limited partner who has perhaps given money or property (some financial asset) to the business but is not involved in the day-to-day running of the business. An LLP is a very complex arrangement, it is only allowed in some states and is limited to professionals such as doctors and lawyers who would not want to share in each others' liability but need some of the benefits a company can offer as opposed to private practice.
I hope you find this information useful.
Monday, October 1, 2007
Bars for Sale in Downtown Athens
It is fairly common as a commercial real estate agent to receive quite a few calls regarding people wanting to open a bar in the Downtown Athens area. Very few brokers know this market or even want the hassle of learning it. It is even harder to get a straight answer about what is actually available in the area. That is where we come in.
A new phenomenon has recently occurred where owners of the Bars in Athens, GA have begun to sell their businesses. Some of the prices garnered for these bars is astounding with asking prices quoted in the hundreds of thousands of dollars.
How does one value a bar for sale in Downtown Athens? It is not simply the typical process of valuing Profit and Loss statements used to analyze the business. Other issues that are less tangible have come into play. How long is the lease? Is it below market value? Where is the bar located? How strong is the business with the college students? Does it have an outdoor area for smoking to counter balance the issues associated with the smoking ban? Believe it or not there is a multiple of Net Operting Income or Gross Profits to determine the bar's value. Give us a call if you are interested in purchasing a bar in downtown Athens. We are happy to be your advisors in the process.
A new phenomenon has recently occurred where owners of the Bars in Athens, GA have begun to sell their businesses. Some of the prices garnered for these bars is astounding with asking prices quoted in the hundreds of thousands of dollars.
How does one value a bar for sale in Downtown Athens? It is not simply the typical process of valuing Profit and Loss statements used to analyze the business. Other issues that are less tangible have come into play. How long is the lease? Is it below market value? Where is the bar located? How strong is the business with the college students? Does it have an outdoor area for smoking to counter balance the issues associated with the smoking ban? Believe it or not there is a multiple of Net Operting Income or Gross Profits to determine the bar's value. Give us a call if you are interested in purchasing a bar in downtown Athens. We are happy to be your advisors in the process.
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