Test out my Worksheet

Hey all, I am very new and trying to figure out exactly how to evaluate my new commercial investment property. I have created my own worksheet (becasue doing it myself helps me understand the drivers better) but I need some experts to validate that I am thinking about the numbers correctly. If it works, feel free to use it yourself. My first big question that is effecting my CapRate is; does Debt Service Interest get added into NOI? If not how should I think about it? My second question is; do I recalculate my numbers after rehab and stabilization i.e., It will take 3 months to rehab and therefore my vacancy in year one is about 30%. The second year my vacancy will be approx 5%. Apparently I can’t attach a spreadsheet (or I have’nt figured how), so I can email it to anyone who is interested in reviewing it. Many thanks.

Hi Jonny – you don’t add debt service into the NOI, that goes “below the line”. However, it most certainly affects your cash flow. You should do at least a 5 year projection that incorporates your business plan. So in Year 1, you might show a 30% vacancy rate and a ton of capital improvements and repairs. Once stabilized in Year 2, your numbers would start to “normalize”. I’ll message you directly and I’ll take a look at your spreadsheet.

Michael