The Nest Egg Builder https://thenesteggbuilder.com Expertly guiding you to passive real estate investments for financial freedom Mon, 01 Nov 2021 19:54:57 +0000 en-US hourly 1 https://wordpress.org/?v=6.5 https://thenesteggbuilder.com/wp-content/uploads/2021/09/mb-favicon-150x150.png The Nest Egg Builder https://thenesteggbuilder.com 32 32 Net operating income (NOI) https://thenesteggbuilder.com/2021/10/06/noi-2019-example/ https://thenesteggbuilder.com/2021/10/06/noi-2019-example/#respond Wed, 06 Oct 2021 01:47:26 +0000 https://thenesteggbuilder.com/?p=21532

Hi, I’m Peggy Beauregard. We are the Real Estate Matchmakers. We match cash to deals and deals to cash. We save you time and you make money because the deals come to us and the returns go to you.

And here’s one of the things that’s really important when you’re looking at investing in a piece of property: the income and the expenses. That’s how you get to your net operating income. See? This says “operating,” so this is what it is to operate something.

So, the first thing you look at is your income. Here’s your income. These people have—I’m looking at the same industrial that I showed you previously. This is what the income is per year. These are reimbursed expenses, which means something like they might pay utilities, and the utilities get paid back by the renter, for instance. I don’t know if that’s exactly what that is, but it could be that. They could pay the water, for instance, but they’re not responsible for water, but because the way it’s structured. So, that could be an expense. I don’t know exactly what it is. You can always find out.

And so, you have what’s called your “Effective Gross Income.

If this were an apartment complex, for instance, it would have the rental income, and then it might have something like RUBBS, and that’s utilities that are reimbursed, reimbursed utilities, RUBBS. Or it might have, if there’s a laundry room, it would have laundry, and then that would have an—that would be an income, additional income.

So, every kind of property has different kinds of income.

And then, so here are the operating expenses, $370,000, and that’s how they get the operating income.

Now, to get that $370,944, there’s the operating expenses. So, they’ve listed everything – real estate taxes, insurance, gas, electricity, water, repairs, property management, very important to have in there.

If you see a—if you’re looking at a property and there’s no management in there, you’ve got to add your management. There is always management. If you are managing it, there’s a management fee. If the owner’s managing it, there’s a management fee. They may be taking it in a different way, but that is an expense. Super important to have it there.

So, mowing and landscaping, which could also—well, they don’t have anything here, because the tenant takes care of that. And then here’s the air conditioning, and the tenant takes care of that. And the parking lot, well, look at that. The tenant takes care of that. So, I was talking about cost segregation, and the parking lot. So, you won’t actually get any depreciation particularly on that, because the tenant takes care of that.

So, that’s how you got your net operating income. There are your expenses, here’s your income. Subtract your expenses from your income, and that gives you your net operating income.

If you have any questions, please let me know.

If you have a property you’d like me to look at, an investment you’d like me to look at, I’m happy to do that. If you have a situation that needs to be resolved, I’m happy to do that, too.

]]> https://thenesteggbuilder.com/2021/10/06/noi-2019-example/feed/ 0 Look at the deal https://thenesteggbuilder.com/2021/10/05/elementor-21446/ https://thenesteggbuilder.com/2021/10/05/elementor-21446/#respond Tue, 05 Oct 2021 21:24:00 +0000 https://thenesteggbuilder.com/?p=21446

Hi, I’m Peggy Beauregard. We are the Real Estate Matchmakers. We match cash to deals and deals to cash. We save you time and you make money. The deals come to us and the returns go to you.

And I said I would share and go over a deal so you could get a better idea and learn more about how the real estate works.

So, this is one of the syndicators I work with, or sponsors, whatever you like to call them. And this is something that’s already closed, and so, I thought I could use this to give you an idea of the things to look for when you’re looking at a potential investment.

And this particular one is an industrial. You’ll see that the purchase price is 9 million. It tells you what the gross square feet are, gross building size in square feet. And there’s 4 tenants in it. It’s 100 percent occupied. The property was built in 1973. And it is rather old, and got remodeled either twice, or over a period of time, or they—it depends. Now they might have done one unit at a time, and so, when somebody might have moved out, or needed upgrading, they would do the rehab on it.

It has 150 parking places. Now, one of the things we talked about is cost segregation, and this is really important to know, because 150 parking, that means that you have to do blacktop, you have to do snow removal, because this happens to be in Michigan, or some place where there’s snow. You have to redo the lines, all of that.

And, it’s on 21 acres, so it’s quite large. As you can see, their net rentable space is 250,000 square feet.

And here’s the NOI, the net operating income. It is $879,212. That’s the income minus the expenses, the net operating income. Based off of the net operating income, you know what the capitalization rate, or your interest rate return is at 9.25 percent.

And here’s the price per square foot - $36,68. That’s the price per square foot. By taking the square footage and dividing it by the price, you know how much you’re paying per square foot.

And that’s just a general look over, which every sponsor has. These are really important things to know. Your occupancy is super important, the number of tenants is important. Here’s why. You’ve got 4 tenants. If one moves out, you’re still going to get your cash flow. If you’re in something larger that’s got 20, then you—if somebody moves out, you’ve got your cash flow. If your number is 1 and somebody moves out, then you are 100 percent vacant. It’s really important to know what your vacancy rates are.

You need to know what’s going on in the economy, you need to know if this is the kind of property that’s going to have the right tenants in it for the next 20 or 30 years. That’s what’s important.

Obviously, these are big manufacturers that need 250,000 square feet. Even if you divided that by 4, you’d still have 80,000 square feet.

Let me know if you have any questions about this. I know it could be a little complicated. I’ve been doing this for a long time, so it’s really easy for me. I just look at it and I know, “Oh, great, that’s a very nice cap rate. How much money do we need to raise? What kind of loan?”

So, there are other questions, and I’m going to go over that in the next video.

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