Commercial Real Estate Evaluation Ratios

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Evaluation Ratios

Prior to forming the national investment firm Ashcroft Capital, financial services professional Frank Roessler worked at M&A Real Estate Partners, where he assisted with acquisitions including underwriting and due diligence. As the principle of Ashcroft Capital, Frank Roessler utilizes his years of experience and extensive network of brokers and property managers to identify multifamily real estate investment opportunities with a high risk/return ratio.

There are a variety of ratio calculations investors can use to evaluate a property, including:

Capitalization Rate. The capitalization rate is a risk and reward calculation where a higher rate indicates more risk, and thus, a higher potential return. The capitalization rate evaluates the property’s performance for only the first year.

Operating Ratio. This ratio compares the annual income to what’s required to cover the property’s operating expenses (including debt). An operating ratio above 100 indicates the property’s annual income is not covering expenses.

Debt Coverage Ratio. This calculation is used to determine if a property will be able to cover operating expenses plus mortgage payments. An accurate debt coverage ratio requires all income and all expenses be identified.


Commercial Real Estate Trends for 2017

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Commercial Real Estat

Frank Roessler is the founder of Ashcroft Capital, a real estate investment firm in Westwood, California. Prior to founding the firm, Frank Roessler gained experience in commercial real estate as an acquisition associate and then an asset manager for M&A Real Estate Partners, also in Westwood.

Several factors are expected to shape the commercial real estate market in 2017. Many within the industry feel optimistic about the market’s outlook.

Property values are continuing to rise, bringing them to a level nearly comparable to that of 2008. The confidence inspired by this healthy growth combined with the likelihood of lower tax rates and fewer regulations is anticipated to fuel growth in commercial real estate sectors such as multifamily housing, industry, and hospitality.

Another factor likely to influence American commercial real estate in 2017 is the continued influx of foreign investments. In 2015, US cities with the highest occurrence of foreign commercial real estate investment included New York, Los Angeles, Atlanta, Chicago, and Dallas. By September 2016, San Francisco and Phoenix had replaced Atlanta and Dallas on the list, with China representing the greatest number of foreign investors in the US.