How to: Increase Your Properties Cash Flow & Appreciation

Morning Jump Start

If your Monday is anything like mine you’ve read through your weekend emails and energy levels are high after drinking at least your second cup of coffee (thanks to my office sales manager/coffee guru, I’m now have a coffee habit and am becoming quite the coffee snob!) and lunch time is quickly approaching. For many of us coffee (and its caffeine) is a key ingredient to building momentum in the morning. Now let’s take a look at a key ingredient for building momentum in your real estate investments.

Investment Jump Start

Wither you’re a property owner, user or buyer, there are tons of opportunities to make money in today’s commercial real estate market by adding value to properties. By adding value essentially you are creating your own appreciation or increasing the cash flow of a property rather than allowing the market to dictate your returns. So how do you add value and where do you start?

Increase Your Net Operating Income

A good place to start when analyzing investment property is to look at the income and expenses. If you take the income and subtract the expenses (as well as a small percentage for vacancy and losses) you are left with the Net Operating Income or NOI. If you can increase your NOI you can increase your cash flow or value and likewise, if the NOI decreases so does your cash flow or value. Wouldn’t it be great if you had someone working for you to help ‘add caffeine’ or increase your NOI?

Add Caffeine Add Value

That is exactly what I do for my clients. I help investors identify and purchase undervalued investment properties with upside potential to increase NOI, or position their current properties for disposition to realize maximum returns.

Passive Investment Income & Value

Let’s take a look at a 3,000 square foot retail building which hasn’t had any recent improvements or rent increases and currently rents for $1.00 per square foot on a Gross lease (Landlord pays property taxes, insurance, & maintenance expenses). If you do the math the annual gross income would be $36,000. Now take away an estimated 35% for expenses you are left with NOI equal to $23,400. An investor with investment criteria of a 6% capitalization rate would pay $390,000 for the property.

Add Value Investment Income & Value

Now let’s say you were able to convert the same building with a Gross lease to a Triple Net lease (NNN), where the tenant shouldered the cost of the property taxes, insurance, and maintenance expenses. The result is an NOI of $36,000. The same investor would pay $600,000 for the property!

Add Value By Working With An Investment Specialist

The above is a general basic example of how the value of investment property can potentially be increased with proper management. If you are a property owner, user, or buyer, working with an investment specialist can add dollars to your bottom line by time and energy saved to the client as well as benefits received from the skill sets required to analyze, market, and negotiate a successful sale, purchase or lease transaction.