Commercial Real Estate – Valuing The Cash Flow

Many investors don’t understand the power of commercial real estate. I too had reservations until I understood the power and safety commercial real estate can provide. Commercial real estate is similar to trucks. Trucks come in all sizes and all shapes – a Ford Ranger to an 18 wheeler. Commercial properties come in all sizes and shapes – a standalone building that houses a small restaurant to the Empire State Building. People read in the newspapers that commercial property prices are crashing. People notice the strip malls have a lot of vacancies and it scares them away. Let’s take a look at the power of commercial real estate and a quick note about market cycles. Commercial real estate is a business and is priced based on current cash flows. For simplicity sake, commercial property pricing is based on 10 x annual cash flow, not including debt service (loan). So a property that yields $10,000 in cash flow is worth $100,000. Regardless of the type of property, if you increase rents by 1% ($100) the value goes up a $1000. Decrease expenses by $100 and the value goes up $1000. So what? Let’s look at a simple apartment example.A small apartment complex (10 units) has an annual cash flow of $50,000 and is for sale for $500,000. It has a lot of long-term tenants paying below market rents. You put down 20% or $100,000 (there are ways to make it someone else’s money). We’ll assume it is a positive cash flow property even with the debt service (loan payments). First a storage area is made into a laundry facility that provides $5000 on annual basis. You just increased the value $50,000. Next rents are raised the first year to market rents. Raising rents $50 per unit increases cash flow $6000. You just increased the value $60,000. That means you have doubled your original $100,000 in the first year and you get to keep the $11,000 cash flow. There are many more ways to increase the cash flow including: separate utilities and have tenants pay utilities, decrease vacancy, work out a deal with dish network and get paid, reduce maintenance costs, and more. Just by raising the rent $10 a year increases cash flow $1200 a year and increases the value $12,000. In three to five years you’ll have cash flows of $70,000 to $100,000 (less debt service which remains constant) and you can sell the property for $700,000 to $1,000,000. Now you see the power of commercial real estate.Just like single family homes, not every property is a good deal. First you look for commercial properties in areas that have improving rents, increasing employment, and areas where the entire area is going through gentrification. Next you look for properties that have a value proposition – rents too low, poor management, ability to install laundry or some other measure to increase cash flow. You would be surprised how many buildings are poorly managed or have below market rents.I’ve used an apartment as the example; however this same model works for office buildings, mobile home parks, strip malls and more. All types of real estate (all types of investment) go through cycles. When the economy is booming for example, the vacancy in office buildings goes down significantly (prices go up). Of course the opposite is true during an economic downturn. During economic downturns more people move to apartments, mobile homes and need storage facilities. By observing these cycles one can move in and out of various positions to minimize risk and increase portfolio value.
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Contemporary Security Management by John J Fay

The main word to notice in the title of “Contemporary Security Management” by John J. Fay is the word management. This is a college type textbook for those in security management. Please take this into consideration if you are thinking this is either a book on security, or a popular type management book. It does not fit those categories. Therefore, if that is what you are looking for, you will need to look elsewhere. However, if you are studying to be employed in security management, are enrolled in a class that is using this text, or happen to want a college style textbook on the topic for self-study because you are employed in such a position, this is a very detailed and good book on the topic.Many large organizations, and now even smaller ones, have a security department. This text teaches security professionals how to operate an efficient security department and how to collaborate smoothly with other groups inside and outside their own organization. The book provides a comprehensive introduction to security and IT security management principles, which overlap with other management principles. So this is a management text aimed at the Chief Security Officer or others in positions in the security industry that aim for management.Like many college textbooks, each chapter starts with a brief section on what you will learn, and ends with review questions and references. There are ample side bars, check lists, and graphs throughout. The book’s four hundred and fifty pages are divided into twenty-five chapters. These include: Historical Roots, Organizing, Managing People, Leadership and Management Skills, Strategy, Budget Management, Managing Change, Making Decisions, Managing Risks, Managing Guard Operations, Managing Physical Security, Managing Access Control, Managing Investigations, Pre-Employment Screening, Emergency Management, Business Continuity, Managing Information Security, Substance Abuse, Executive Protection, Workplace Violence, Employee Awareness Program, Vulnerability Assessment, Security Program Design, Critical Infrastructures and Key Resources, and The Terrorist Threat. The book also contains an Index at the end.If you are not a professional actively working in such a position, needing guidance, or if you are not in a class where this book is required, you may find the reading a bit tedious, like many management text books. (I read quite a few getting my undergraduate degree in Business Administration with a management emphasis.) And a lot of the management principles, such as hiring people and dealing with budgets are universal, not just to security management, so don’t get this book thinking it is all about security.Bottom line, if you are in the security management field, or want to enter that field, this is a comprehensive textbook on the topic. There is a lot of useful information in this single volume, and it will be very valuable for those working in such management positions.

Professional computer science paper writers

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