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 Current Rate of Return
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link to this page: https://www.planease.com/commercialrealestatevideotraining.aspx?1=Ratios&2=CurrentRateofReturn
How is the Current Rate of Return calculated for commercial real estate investments and developments? What are the factors that the Current Rate of Return takes into consideration when shown in a proforma income statement, and what is ignored? Why is the Current Rate of Return useful for investment real estate? Considers: Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Sale Proceeds Increase (Current Year Only)
Ignores:
Vacancy, Time Value of Money, Other Years NOI, Other Years Sale Proceeds
... and a lot of other things
Why is Current Rate of Return useful?
Current Rate of Return is not commonly used in commercial real estate analysis. It is a Return on Investment (ROI) type ratio where the cash flow is divided by an investment. Here the investment is assumed be the amount of proceeds you could have received if you sold the property in the beginning of the year, and the cash flow part is the cash flow plus the increase in sale proceeds in the next year. So if this is a high percentage number, do you want to sell in the beginning of the year or after you have received the year's cash flow plus the increase in sale proceeds? If all the assumptions are true, you might want to wait until the current rate of return is a small percentage number.
What is the Current Rate of Return Sensitive to:
Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Sale Proceeds Increase (Current Year Only) The Current Rate of Return is shown in these planEASe Reports:
Author: Michael Feakins
How is the Current Rate of Return calculated for commercial real estate investments and developments? What are the factors that the Current Rate of Return takes into consideration when shown in a proforma income statement, and what is ignored? Why is the Current Rate of Return useful for investment real estate? Considers: Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Sale Proceeds Increase (Current Year Only)
Ignores:
Vacancy, Time Value of Money, Other Years NOI, Other Years Sale Proceeds
... and a lot of other things
Why is Current Rate of Return useful?
Current Rate of Return is not commonly used in commercial real estate analysis. It is a Return on Investment (ROI) type ratio where the cash flow is divided by an investment. Here the investment is assumed be the amount of proceeds you could have received if you sold the property in the beginning of the year, and the cash flow part is the cash flow plus the increase in sale proceeds in the next year. So if this is a high percentage number, do you want to sell in the beginning of the year or after you have received the year's cash flow plus the increase in sale proceeds? If all the assumptions are true, you might want to wait until the current rate of return is a small percentage number.
What is the Current Rate of Return Sensitive to:
Scheduled Income (Current Year Only), Debt Payment (Current Year Only), Vacancies (Current Year Only), Expenses (Current Year Only), Sale Proceeds Increase (Current Year Only) The Current Rate of Return is shown in these planEASe Reports:
Author: Michael Feakins
