Day 1

Net Operating Income

There are many valuable metrics used in the world of commercial real estate, but few are more important than net operating income (NOI).

Capitalization Rate

The capitalization rate (cap rate), like many of the other terms we’ve seen in syndication, is often used by industry experts in an ambiguous way.

Day 2

Returns

While the concept of returns the amount you will earn from a given investment are easy to understand on their face, there are quite a few variables that can make forecasting and pursuing returns a bit more complicated.

Equity Multiple

The equity multiple especially when compared to many of the somewhat ambiguous metrics used in real estate is remarkably simple.

Day 3

Internal Rate of Return

When evaluating a prospective investment, one of the first things investors rightfully want to know is how much is the property expected to make.

Preferred Return

When there are multiple parties with a financial interest in a property which, including the bank, is very frequently the case the relevant stakeholders will need to determine the amount of money each party gets paid.

Day 4

Promote and Fees

In real estate syndications, and most other business partnerships, it will be very important to create an agreement that incentivizes all parties involved to act in each other’s best interests. Ideally, these arrangements will encourage sponsors to act in the best interest of the investors.

Leverage

Leverage, to put it simply, is the use of debt to finance a property. When used correctly, leverage can help make a property much more profitable. While additional leverage does, in fact, expose the property holder to a greater degree of risk, it also puts them in a position to earn greater returns..