CHAPTER 10 Conducting a Financial Analysis This analysis comes somewhat early in your search. After you pick a few options, you work with your financial team and your broker to create it. More factors go into this than you may realize, the biggest being your predicted net operating income (NOI) in your new building. That is so important I have dedicated an entire chapter to it later in this book. You don’t want to rush through this step in an effort to respond faster to a building owner. That’s a common mistake. It’s also almost always a must to have a few realistic candidates. This gives you leverage, and your financial analysis is done to put real numbers to that leverage.
THIS IS MUCH MORE THAN JUST PRICE PER SQUARE FOOT
Other factors in your purchase go into this. Of course, the selling price is the main one, but pricing on construction for your buildout, loan specifics, and money due upfront will also shape your analysis. All that will combine to measure with your projected income, giving you the NOI. This is usually the final factor. All your future cash flows, outgoing and incoming, are estimated and discounted using the cost of capital to give their present values. That produces the NOI, which is the bottom line of your occupancy. It is important to have an experienced broker conducting this portion of the process. It takes formal training in finance 58
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