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Monday, July 12, 2021

Garbage In / Garbage Out: How The Accuracy of Data Can Impact Your Investments

 

TheAnalyst PRO Garbage In / Garbage Out

One of the most important factors when looking at purchasing an investment property is to take a close look at the Net Operating Income (NOI). This is to ensure an investor is paying the appropriate amount at the time of purchase, and can properly project the potential future sales price of the property. Using TheAnalyst PRO platform you can estimate the current value of the property and quickly forecast the future value of a property, for up to 10 years. That is assuming the income and expense data being entered is correct. If the information entered is not accurate, the cash flow projection will be less reliable. This is what Todd Kuhlmann, Founder of TheAnalyst PRO, refers to as “Garbage In / Garbage Out.”

Investment Real Estate

Looking at acquiring Commercial Real Estate property is a major undertaking for any investor. Whether an apartment complex, office building, retail space, or industrial property, you can quickly put TheAnalyst PRO to work. Let’s review how you can ensure you are using the most accurate information possible when calculating the Net Operating Income (NOI) for a property.

Determining Value

The first step in determining the accurate value of a property is to review the current cash flow. This is also known as the going-in or year one value. Using TheAnalyst PRO provides you with the advantage of being able to quickly and easily determine the future cash flow. Cash flow will come from various sources, based on the nature of a property. It could come from the operations of the property such as rental income, as well as the appreciation value when the property is sold.

You will want to review the financials you have been provided and adjust for current market conditions. This is what Todd refers to as “Scrubbing the Numbers”. It is important to remember that in most cases the proforma you’re provided with will have been produced by the broker who is trying to sell the property. You will want to review the trailing 12 months of cash flow and expenses for the property. These are going to be the numbers we can scrub through, and make sure they accurately represent the property.

TAP NOI Keyboard

It can be very time-consuming and challenging to obtain all of the appropriate information, but it could be the difference between being profitable or taking a loss on your investment. A major benefit of TheAnalyst PRO is that with the advanced algorithms used by the program, you can accurately project future cash flows each year for up to 10 years. Here are some ways to review the information you have been provided.


 

“When I purchase investment real estate, I am purchasing future cash flow”

Todd Kuhlmann, Founder of TheAnalyst PRO

Scrubbing The Income

Start by obtaining a copy of every lease for the property. It is important to compare the leases with the rent roll. A rent roll shows the current rental income for an investment property. It can be used for any type of cash-producing property such as apartment buildings, office space, retail and leased land. Information from the rent roll can be used to provide key property financial performance and information on the rent being collected.

We often find the lease terms, or the lease amounts, do not match what is reflected on the rent roll. We encourage investors to physically inspect each tenant’s space, to ensure the lease details provided are accurate for the property and that you have a copy of all leases for tenants occupying space on the property. This is a big part of making sure we are not putting bogus information into TheAnalyst PRO calculations. Remember, “Garbage In / Garbage Out.”

Scrubbing The Expenses

Review the historical expenses in detail, and properly scrub through each line. One of the most common errors found in the proforma for expenses is underestimating certain expenses such as professional management fees, current hazard insurance premium and property taxes. If the current seller is self-managing the property, they may not include management expenses on the historical expense report. On the other hand, the seller may include items that are not relevant to the operation of your property, such as including auto expenses that has no actual impact on the operation of the property.

Property Taxes

Property taxes are often one of the highest recurring expenses. Scrub the property taxes by researching the current assessed value of your property. Many times, the current assessed value is less than the purchase price. Assessment guidelines of property values alter based on the state, so it’s always important to be aware of your state's assessment regulations. States have different requirements for how often reassessments are conducted. For example, in the state of California, a property will be reassessed when a “change of ownership occurs” or new construction finishes. In this case, the property taxes will be based on the purchase price, not last year’s assessed value. Adjust the property tax expense based on the anticipated reassessed value upon purchase of the property. 

Replacement Reserves

All properties will require standard minor maintenance and repairs that may recur each year. However, larger non-recurring repairs are often categorized as Replacement Reserves. Replacing a worn-out roof or repaving a parking lot are a couple examples of work that would be funded by a replacement reserve, and not as a property expense. Most owners and property investors know they will eventually have to invest in these capital items. Reserve funds can also be used to cover any emergency costs not covered by insurance. An example of this includes a central boiler system that stops functioning.

Those are a few situations in which we can ensure the data being inputted into TheAnalyst PRO is as accurate as possible. Now that we have that information, we can take a look at the data that is being output.

"Bricks and sticks are great and I like that I can touch and feel my investments, but the investment value is based on future cash flow."

Todd Kuhlmann, Founder of TheAnalyst PRO

 

TAP NOI

Net Operating Income

After scrubbing each line of the cash flow and property expenses, we can properly calculate the current NOI and project future NOI. TheAnalyst PRO was designed to provide you with this information quickly and efficiently, saving time from having to calculate it in a spreadsheet or other complex software. It also uses advanced algorithms to accurately forecast future income and expenses, providing a much more accurate NOI to work with.

Uses of Net Operating Income

There are two major uses for the NOI. The first is that appraisers will use the NOI to calculate property values at any specific point in time using the market CAP rate. Having the ability to predict future values is one of the greatest benefits of investing in commercial real estate and TheAnalyst PRO makes it easy. At any time, investors will be able to see the estimated value of their property on a yearly basis for the next 10 years.

NOI is also used by lenders to determine the maximum loan amount you will be able to get. TheAnalyst PRO also has a built-in loan calculator that can provide you with the maximum loan amount, based on the Year One NOI of the property.

Net Operating Income Accuracy

If the calculated NOI is too high, you may be overpaying for the property. And if it is too low, your future sales price could be much lower than you have estimated. The rule of thumb is that for each dollar the NOI is off, it can change the property value by $10 - $20. This is why it is so important to have accurate information being entered.

Tap Cap Rate Formula

Example of Net Operating Income Variance

Let’s imagine you have a proforma that has the Year One NOI projected at $500,000, with a CAP rate of 7%. This would mean you have an estimated property value of $7,143,000.

After scrubbing the numbers, you determine that the actual NOI is $400,000. This would result in the updated property value being $5,714,000. This would be a decrease in value of $1,429,000.

Using TheAnalyst PRO, you can quickly determine the proper value of your investment property, as long as the numbers you have used are accurate.




 TheAnalyst® Pro

TheAnalyst PRO is CRE Tech®’s #1 investment modeling (DCF) software, including Offering Memorandums, Lease Analysis, Location Risk, Demographics, Infographics, Flyers & Brochures.

 






Thursday, May 6, 2021

Turn your Offering Memorandums into Property Websites & Flipbooks in Minutes

 

Takeaways from our Webinar:
Turning your OMs into Property Websites & Flipbooks


TheAnalyst PRO new enhancements featured in this webinar:

★ Updated Property Website Template Options ★

  Flipbook Presentation Format 


(samples above - customizable to your logo colors)



This webinar not only demoed our newest features, it also emphasized the speediness in which you can create these eye-catching marketing pieces!


Here are the key takeaways:

Speed-to-Market  a business strategy that withstands time
If you can get to your customers quickly, you instantly have an advantage over your competitors. TheAnalyst PRO triumphs in our ability to make complicated concepts simple for you. That includes creating property websites and flipbooks from your OMs in under 10 minutes. The same goes for our marketing flyers and brochures!

Time Savings  making your professional life easier
Need to make a quick change for a client? TheAnalyst PRO saves everything for you - just change the needed entry field, and push a button to create the updated marketing piece. Fast and easy for you - professional and instant follow up to your client!

The Power of Presentation
There's no doubt - marketing that dazzles the eye gets you noticed! Add a spice of professionalism and you have marketing that earns you deals. TheAnalyst PRO is your CRE presentation partner! On top of these easy-to-create property websites and flipbooks, we offer several other marketing pieces, along with data represented in colorful graphs, charts and infographics.

Confidentiality Options
1) You select which information from the OM appears on the property website. Just the basics or a detailed pro forma. 2) Share and market a property website URL as you see fit. These are not made readily available to the public domain. 3) Want to know who downloads the information? There is an option to track downloads, serving as the lead-generator for follow up!

Unlimited Hosting
TheAnalyst PRO takes care of the storage for you. We host an unlimited number of property websites for you on our secure servers, and you can always access your property URLs in your TheAnalyst PRO account.

Wednesday, March 31, 2021

Excel vs. TheAnalyst PRO

 

Key Takeaways from our Webinar:
Excel vs. TheAnalyst PRO
CRE Tech® Heavyweight Championship




Thank you to, Excel expert and University of Denver professor, Jeff Engelstad for dueling with TheAnalyst PRO founder, Todd Kuhlmann, in a friendly competition between these two software platforms and their role in commercial real estate analysis. 

Who won?

Take a look at the key takeaways below, then watch the full presentation to find out.


Key takeaways from the webinar:


Flexibility Factors 

Creating unique calculation sequences in Excel is an advantage, if you know how to set them up and create them. Not only does TheAnalyst PRO present unlimited investment scenarios where you can change inputs and re-run in seconds; it also goes with you wherever you need it (cloud-based: laptop, tablet, phone). Making last-minute changes in the field keeps you in front of clients longer and saves time.


Ease & Efficiency

The founding principles of TheAnalyst PRO! Complex analyses are made simple and time-intensive report formatting is done for you. Excel can have limitations here. The need to set up multiple spreadsheets for different property scenarios can be consuming. Excel requires users to set up all of their own scenarios and calculation macros, which leads to our critical next factor...


Risk of Error

Both products follow the adage garbage in, garbage out. With TheAnalyst PRO you can be assured we are taking care of the calculations for you, based on the data you enter! When working in Excel, sometimes it can take a genius, like Jeff, to properly set up the correct calculations and sequences, then carefully not taint them as you are working within the spreadsheet. One wrong move can send the entire spreadsheet into disarray mathematically.


Formula Transparency

Excel shines in this area - offering infinite transparency to track the formulas used for the calculations. Expert witnesses for court cases often use this transparency. Since no two deals in commercial real estate are the same, the algorithms used by TheAnalyst PRO are very complex to accommodate for these unlimited scenarios.


Exhibiting Professionalism

Another goal of TheAnalyst PRO is to help CRE professionals be just that - PROFESSIONAL. The reporting and output offered by TheAnalyst PRO is some of the finest on the market, automatically generating graphs, and offering marketing materials to accompany all of those magical analysis scenarios. Excel lags immensely in this area, and can be overwhelming for some viewers to digest.



So the declaration of the ultimate winner rests in each CRE professional's hands (see comments from webinar participants below). Evaluating your analysis needs, and weighing the merits of each product as they pertain to you, is a critical piece of this puzzle. An added benefit is that TheAnalyst PRO provides a full video training section, help buttons throughout the platform and live support to all subscribers.


On the other hand, we are a big fan of collaboration, and see a great value in using both products together, especially since TheAnalyst PRO reports can be downloaded into Excel spreadsheets. 


Friday, March 5, 2021

Expansion into Spanish-Speaking Markets


Spanish


This week we celebrate exciting international expansions incorporating the Spanish-speaking world of Commercial Real Estate.

Just unveiled -
the full Spanish version of the TheAnalyst PRO

We also welcome CENTURY 21 México and CENTURY 21 Central America as new strategic world partners. TheAnalyst PRO is now available to CENTURY 21 member franchisees in México and Central and South America.

Read on to learn how this benefits ALL subscribers, whether they speak Spanish or not!


global handshakeEnhancing TheAnalyst PRO to include all Spanish text and terminology, is not only useful to Spanish speakers, it opens business opportunities between English and Spanish speakers worldwide.

Learn how CRE professionals can use this to their advantage, all for the same low subscription price:

1.  All users worldwide can now use the entire TheAnalyst PRO platform in the Spanish language with the switch of a toggle in the profile set-up. This allows native Spanish speakers to more efficiently run their analysis scenarios. 

2.  English speakers can run investment scenarios, then create their reports in Spanish for their Latin investors. This is helpful for native Spanish speaking clients to more quickly review these analyses. Even for bi-lingual speakers, all of the intricate industry terms can require some time to fully translate.

3.  Likewise primary Spanish speakers can create their investment scenarios using the Spanish version, then run final reports in English for those partners or investors who don't speak Spanish as their native language.

4.  CRE professionals can now create Due Diligence, Offering Memorandums and marketing (flyers and brochures) fully in Spanish.


We are honored to have CENTURY 21 México and CENTURY 21 Latin America as our new strategic partners. They have an impressive presence in Latin America with 500 offices and 7,000 agents.

"A strategic partnership initiative with Todd Kuhlmann, the program's designer and founder, TheAnalyst PRO suite of commercial analysis tools will provide CENTURY 21 member franchisees a "Best in Class" competitive advantage to promote Commercial Properties in Latin America to the world."  - Steven Yeager, COO CENTURY 21 South America

We value our industry partners and CENTURY 21 Commercial has long been in partnership with TheAnalyst PRO. These professionals will have a brilliant advantage in their dynamic commercial real estate transactions. 

We look forward to sharing their business successes moving forward.

TheAnalyst PRO is now customized to empower all of the Americas with this new Spanish enhancement and already established Canadian mortgage calculations.

This is a valued addition to our existing international presence in South Korea, Australia and Japan.

As always, more enhancements are on the way to increase your business opportunities - stay tuned!


Wednesday, February 3, 2021

Six Takeaways Using Comparative Lease Analysis


Six Key Takeaways from our Webinar:
Lease Alternatives & Negotiations Using Comparative Lease Analysis


Lydia Bennett, CCIM, CPM & Todd Kuhlmann, CCIM



Thank you to our guest speaker, Lydia Bennett, CCIM, CPM, who joined TheAnalyst PRO founder, Todd Kuhlmann, CCIM for a robust presentation of the importance of Lease Analysis in tenant and landlord negotiations and investment decision-making.

Harnessing the knowledge of how to compare lease options, no matter which commercial real estate ownership position, is key to professionally advising your clients, managing financial RE investment, or evaluating next business moves.


Six key takeaways from our webinar presentation:


1.  A commercial property’s value relies heavily on its lease contracts. Commercial real estate revolves around leases, including lease rate, lease term, and overall lease value. Whether you specialize in lease representation, investment (cash flow), property management, lending, or appraising, the underlining value of the property is based on its lease contracts.


2.  Understanding both perspectives is critical. Tenant and Landlord


3.  Rentable vs. Usable Sq. Ft (primarily for office properties). TheAnalyst® PRO makes this quick and easy by calculating the tenant lease cost for both rentable and usable area.


4.  Net Present Value (NPV). Calculating the NPV of a lease is an important factor in lease decisions and negotiations. Using the appropriate discount rate, NPV will determine today’s value and cost of an existing or proposed lease.


5.  Due Diligence at its finest! Determine your client's needs. Analyze the market. Create your shortlist of lease alternatives in preparation for analyzing the options.


6.  Analyze the CRE options quickly using TheAnalyst® PRO. Analyze a single lease, or analyze and compare up to 5 leases, side-by-side, in an extensive Summary and Detail PDF Report. TheAnalyst® PRO will complete a multi-page analysis from both the Tenant and the Landlord Perspectives. Quickly enter lease details to produce an impressive report showing:


Monthly lease payments
Expense reimbursements
Rent concessions


Take a look at the webinar Case Study reports created in TheAnalyst® PRO:


   


      

Key Lease Terms Everyone Should Know:


•  Parties to the Lease

•  Types of Leases: Gross, Modified Gross, Absolute Net

•  Tenant reimbursements: What IS and IS NOT included with NNN leases?

•  Typical Terms

•  Identification of Parties and Space, Use, Base Rent, Additional Rent: NNN Expenses, Term / Lease Commencement / Lease Termination, Insurance, Options



View the entire recorded webinar here







Sunday, December 13, 2020

Newly designed Offering Memorandums using TheAnalyst® PRO's exclusive Commercial Package PRO™


What's in TheAnalyst PRO's Commercial Package PRO™?

The better question would be, "What's NOT in this virtual powerhouse?"

In addition to Todd's blog about creatively using OMs to win your next commercial deal, his recent webinar showcasing TheAnalyst PRO's newly designed OM templates also spotlights the automatically created Property Websites.

Check out a sample here!


View this free recording of the webinar featuring:

  • first view of our newly professionally designed OM templates
  • step-by-step demo of how to create your own OMs
  • a view of the automatically created property websites that you can market out directly
  • included in TheAnalyst PRO subscription (no additional charge)
  • adding your own branding
  • THE MOST COMPREHENSIVE yet SIMPLEST & FASTEST OMs AVAILABLE!

Monday, September 14, 2020

Offering Memorandums: A Buyer/Tenant Rep Strategy!

Historically, offering memorandums (OMs) have been used for larger commercial sale transactions by the listing agents. OMs were time consuming to create and many CRE firms have dedicated staff to only creating their OMs and flyers.

Buyer rep agents will typically forward the listing agent’s OM to their buyers, basically branding the listing company to their buyer and not showing their client they conducted any due diligence of the property on their own.

 

Leasing tenant rep agents often send the original property flyer to their client. Again, branding the landlord rep and their company to their tenant.

 

CRE Tech® is changing the rules with our top software platform TheAnalyst® PRO. You can create OMs, and flyers, in just minutes. Not hours. 


You can create an OM, flyer or brochure on any, and EVERY, property you present to your prospective client, whether for a listing presentation, buyer, landlord or tenant. Branding yourself and providing valuable due diligence to your client, including:

 

-       Financial or Lease Analysis

-       Demographic & Infographic Analysis

-       Location Risk Analysis with Flood, Crime, & Environmental reports

-       Property details, maps and photos



 

Speed to market is key, and with TheAnalyst PRO you can create, print and email your OMs, flyers and brochures in under 15 minutes!

 

Impress your clients even further: All OM’s created in TheAnalyst PRO include a dedicated PROPERTY WEBSITE, hosted by CRE Tech®. Simply copy the link and send to your client. They will believe you spent all day conducting the due diligence and creating the OM and Website for them.

 

Click here for a sample Property Website and download the full OM in PDF format. 




"Before it wasn't feasible for a Buyer/Tenant Rep to create a full OM on each property

they were showing their client. When it takes just 10 minutes to create 

your own branded OM, it's not only doable - it's undeniably clever! 

What a way to stand out from the competition!"


Todd Kuhlmann, CRE Tech® Inc. and TheAnalyst® PRO Founder