We offer all clients a complete, customized market positioning and pricing analysis to help them to determine their property’s value and how to add value with our Broker Opinion of Value service.
We offer this free of charge, as a service to our clients. Our approach includes a blend of financial modeling and proprietary rent and sales comps.
Since investment real estate is valued based upon the cash flow it generates, both current and pro forma, our BOV approach places the most importance on the underwriting, with the following process:
- We analyze the rent roll and operating expenses and compare them to market comps to determine any upside opportunities as well as risk due to rollover, tenant creditworthiness, etc.
- We then underwrite to the current and pro forma Net Operating Income (NOI). We also go another step further to look at “below the line” expenses such as TI, commissions, vacancy, etc., so that we can model in reserves. With this advanced underwriting we are then able to calculate an owner’s Net Cash Flow Before Debt Service.
- Once we have calculated the NOI and reserves, we are able to apply a market cap rate based upon many conditions. This is where the art comes in. The cap rate will vary based upon credit quality, lease term, location, rents relative to the market, interest rates for financing, deferred maintenance obligations, anticipated reserves, and many other factors.
We maintain a large database of sales and rent comps from the transactions we have closed over the years. We never share this information with outsiders due to confidentiality, but we use this data to help us determine appropriate cap rates and rental rates. In most cases, we will share relevant comps with our clients for the property we are valuing.
If you are interested in a free Broker Opinion of Value, click here.