The Dirty Four Letter Word Of Commercial Real Estate Investors

Darin Garman, CCIM

A big mistake a lot of people make when it comes to investing in commercial investment property is that they forget one simple thing:

Its All About The Math!

Not complicated math either. It really comes down to rents less expenses less any loan payments equals cash flow in our pockets.

Then, add loan principal reduction AND appreciation as icing on the cake of commercial property.

That is Garman Math 101.

Should be your Math too.

Always keep in mind that it is not about the pretty color of the building, not about whether the building has garages or balconies or a TV room or new maintenance free siding.....

Its all about the numbers baby!!

So, your first job in examining a potential "deal" needs to be the numbers. Whether they have a swimming pool is insignificant - it the numbers.

You see, the sad thing is when an owner plows thousands of dollars in improvements into a property and thinks he will get his costs right back. No way. I see this happen all the time. Why? New siding did not increase his net income. It made the property look better but his cash flow is still the same.

Numbers, numbers, numbers...

More on this next week.