I just went from residential real estate into commercial real estate and it’s a whole different ball game and I love it I’m finally dealing with serious people and it’s not easy but I prefer that
Bid-Ask Spread: Difference between what sellers are accepting and what buyers are offering - Wide bid-ask spread = large difference between the bid and the ask. This leads to less transaction activity Price Discovery: Time period where significant bid-ask spread exists. Cap Rate Compression: Cap rates decreasing in the market - Investors are willing to accept lower cap rates Cap Rate Expansion: Cap rates increasing in the market - Investors are requiring higher going-in NOI yields Risk Premium: Incremental return over the assumed risk-free rate (usually the equivalent term US treasury yield) Widening/Tightening lending spreads: Loan interest rate = "spread" + risk-free rate. This is the increase or decrease in that spread
Thanks for sharing this helpful video on key terms in commercial real estate! It's crucial to stay up to date on these conversations, and the terms you mentioned - bid ask spread, price discovery, cap rates, yield expectation, cap rate compression, cap rate expansion, and risk premium - all sound like they play important roles in the industry. Understanding the bid ask spread and price discovery is especially important in today's market with a significant spread leading to a slowdown in transaction activity. It's also interesting to learn about cap rate compression and expansion and how they reflect changes in market cap rates and investors' willingness to accept lower initial yields. Finally, the concept of risk premium is crucial to consider when making investments. Thanks again for sharing this valuable information!
Thank you for all the videos, emails, and courses! I was able to land an internship with JLL and without your knowledge I don’t know if I would have been picked. Keep up the great work!
"Underwriting" was embarrassingly the hardest concept for me to understand starting out as I had nobody in my family/friends/life or school that taught me this concept. It didn't click until I started to do UW myself. Most intimidating thing is not knowing what UW is then getting sent a full UW model. I def learned the hard way.
I have a few important questions about NNN properties. I would like to pay you for your time. If you have time and want to help out, please let me know. Thank you and I hope to see your respond
Amazing informative content, I strongly suggest making a podcast, and Twitter account where Spaces can be done, it’s like an open discussion where everyone can share their experience and knowledge from all over the world 🌍
A cap rate is not an unlevered yield. You are confusing it with Cash on Cash that is unlevered. Cap rate is exactly the same if you pay cash or finance 100%. It is a valuation metric.
FALSE! Cap rate is the unlevered yield. Cap rate = NOI/purchase price, Which is the INITIAL NOI YIELD aka unlevered yield. He is very correct in his explanation.
@@jaromejordan7943 Cap rates come from an income approach to VALUE The formula is V=i/r In a 10 cap market investors have paid $10 for a possible dollar of NOI $10=$1/10% In a 5 cap market investors have paid $20. $20=$1/5% See it is used to value NOI. It is not a rate of return. Think about it, why would an investor pay TWICE as much ($20) for HALF the "return" (5%)? Answer that and you will correctly understand cap rates.
@@Walina-gv9ph The answer to your question is because of risk. You also didn’t address leverage in your response… leverage is factored in below the line of NOI.
@@logicalhuman6761 So a cap rate is NOT a "return"? You think it is a risk measurement. Is a 10 cap TWICE as risky as a 5 cap? Nah, cap rates are a valuation metric. It tells you to the penny what NOI traded for. That's it!! Now show me how leverage is factored below the line. Sounds crazy but I'd like to see your input.
@@Walina-gv9ph you have to be trolling at this point 😂. You literally repeated the formula I used. I hope you realize the 10% or 5% used in your example is the yield you get for the income on the property... Also cap rates does give you an indication of risk. A 10 cap market is very much riskier than a 5 cap market due to various of reasons. There's books and TH-cam videos you can watch to understand this. It's very clear you only have a basic understanding of what a cap rate is...
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Any other terms or concepts you'd like to see covered in more detail in a future video?
Hedge agreements
I just went from residential real estate into commercial real estate and it’s a whole different ball game and I love it I’m finally dealing with serious people and it’s not easy but I prefer that
Congrats on the job. Do you have any tips for others trying to transition from residential to commercial?
Bid-Ask Spread: Difference between what sellers are accepting and what buyers are offering
- Wide bid-ask spread = large difference between the bid and the ask. This leads to less transaction activity
Price Discovery: Time period where significant bid-ask spread exists.
Cap Rate Compression: Cap rates decreasing in the market
- Investors are willing to accept lower cap rates
Cap Rate Expansion: Cap rates increasing in the market
- Investors are requiring higher going-in NOI yields
Risk Premium: Incremental return over the assumed risk-free rate (usually the equivalent term US treasury yield)
Widening/Tightening lending spreads: Loan interest rate = "spread" + risk-free rate. This is the increase or decrease in that spread
Thanks for sharing this helpful video on key terms in commercial real estate! It's crucial to stay up to date on these conversations, and the terms you mentioned - bid ask spread, price discovery, cap rates, yield expectation, cap rate compression, cap rate expansion, and risk premium - all sound like they play important roles in the industry. Understanding the bid ask spread and price discovery is especially important in today's market with a significant spread leading to a slowdown in transaction activity. It's also interesting to learn about cap rate compression and expansion and how they reflect changes in market cap rates and investors' willingness to accept lower initial yields. Finally, the concept of risk premium is crucial to consider when making investments. Thanks again for sharing this valuable information!
Thanks Justin. Another words that I’m hearing a lot are trended & untrended yield on cost
can you talk how to read a investment report - where is their key point and whether the US portfolio is performing to expectation, thank you - KC Sim
Thank you for all the videos, emails, and courses! I was able to land an internship with JLL and without your knowledge I don’t know if I would have been picked. Keep up the great work!
Congrats, Spencer!!
Thank you for all your videos, they have helped immensely during my first few months in this field
Great to hear they've been helpful, Kaitlyn!
This is very helpful! Thank you
Hi Justin.. I liked your courses in UDEMY ... but are you going to make a Hotel Acquisition Financial Modeling course soon?
Excellent job at explaining this 🙌
Thanks, Fabian!
"Underwriting" was embarrassingly the hardest concept for me to understand starting out as I had nobody in my family/friends/life or school that taught me this concept. It didn't click until I started to do UW myself. Most intimidating thing is not knowing what UW is then getting sent a full UW model. I def learned the hard way.
This is way more common than you'd think, and also took me a few months in my first non-transactional role for this to "click". You're not alone!
I have a few important questions about NNN properties. I would like to pay you for your time. If you have time and want to help out, please let me know. Thank you and I hope to see your respond
Amazing informative content, I strongly suggest making a podcast, and Twitter account where Spaces can be done, it’s like an open discussion where everyone can share their experience and knowledge from all over the world 🌍
Great feedback, thank you!
Love your content. Negative leverage could make this list as well.
Great point!
thank you
A cap rate is not an unlevered yield. You are confusing it with Cash on Cash that is unlevered. Cap rate is exactly the same if you pay cash or finance 100%. It is a valuation metric.
FALSE! Cap rate is the unlevered yield. Cap rate = NOI/purchase price, Which is the INITIAL NOI YIELD aka unlevered yield. He is very correct in his explanation.
@@jaromejordan7943 Cap rates come from an income approach to VALUE The formula is V=i/r In a 10 cap market investors have paid $10 for a possible dollar of NOI $10=$1/10% In a 5 cap market investors have paid $20. $20=$1/5%
See it is used to value NOI. It is not a rate of return. Think about it, why would an investor pay TWICE as much ($20) for HALF the "return" (5%)?
Answer that and you will correctly understand cap rates.
@@Walina-gv9ph The answer to your question is because of risk. You also didn’t address leverage in your response… leverage is factored in below the line of NOI.
@@logicalhuman6761 So a cap rate is NOT a "return"? You think it is a risk measurement. Is a 10 cap TWICE as risky as a 5 cap?
Nah, cap rates are a valuation metric. It tells you to the penny what NOI traded for. That's it!!
Now show me how leverage is factored below the line. Sounds crazy but I'd like to see your input.
@@Walina-gv9ph you have to be trolling at this point 😂. You literally repeated the formula I used. I hope you realize the 10% or 5% used in your example is the yield you get for the income on the property... Also cap rates does give you an indication of risk. A 10 cap market is very much riskier than a 5 cap market due to various of reasons. There's books and TH-cam videos you can watch to understand this. It's very clear you only have a basic understanding of what a cap rate is...