Lease or Buy? Your Business Property Decision In Adelaide Lease or Buy- Your Business Property Decision In A | Page 11

Other key questions to ask yourself include: How much do you expect to make
on the deal? Who are the key players? How many tenants are already on board
and paying rent? How much rental space do you need to fill?
 Learn to Recognise a Good Deal
The top real estate pros know a good deal when they see one. What's their
secret? First, they have an exit strategy – the best deals are the ones where you
know you can walk away from. It helps to have a sharp, landowner's eye –
always be looking for damage that requires repairs, know how to assess risk,
and make sure to break out the calculator to ensure that the property meets
your financial goals.
 Get Familiar With Key Commercial Real Estate Metrics
The common key metrics to use for when assessing real estate include:
 Net Operating Income (NOI)
The NOI of a commercial real estate property is calculated by evaluating
the property's first year gross operating income and then subtracting the
operating expenses for the first year. You want to have positive NOI.
 Cap Rate
A real estate property's "cap" – or capitalization – rate, is used to calculate
the value of income producing properties. For example, an apartment
complex of five units or more, commercial office buildings, and smaller
strip malls are all good candidates for a cap rate determination. Cap rates
are used to estimate the net present value of future profits or cash flow;
the process is also called capitalization of earnings.
 Cash on Cash
Commercial real estate investors who rely on financing to purchase their
properties often adhere to the cash-on-cash formula to compare the first-
year performance of competing properties. Cash-on-cash takes the fact
that the investor in question doesn't require 100% cash to buy the
property into account, but also accounts for the fact that the investor will