3 CE Figure It
The PDF slide deck presents a concise, step‑by‑step framework for evaluating and acquiring commercial real‑estate assets. It begins with a high‑level six‑step roadmap (Foundation, Find, Figure, Fund, Fix & Fill, Flow) and then drills into the core "Figure It" stage, offering a quick snapshot valuation formula (unit mix × market rent → Gross Potential Rent, apply a 50% expense ratio → Quick NOI, divide by a 7% cap rate → Stabilized Value, multiply by 70% → Maximum Cost Basis, subtract rehab costs → Maximum Allowable Offer). A detailed preliminary pro‑forma layout follows, showing income, vacancy, expense categories, and how they feed into Net Operating Income and the stabilized value. The deck includes three worked‑through deal exercises with market rents, asking prices, repair costs, and resulting NOI calculations, illustrating the decision rule (offer only if the maximum allowable offer is below the asking price). Subsequent slides walk through the transactional workflow: drafting and submitting a Letter of Intent (LOI), light due‑diligence (financial documents, rent rolls, basic property walk‑through), executing a purchase agreement with contingencies and earnest money, and heavy due‑diligence (full financial cross‑checks, comprehensive physical inspections, specialist scopes, and bid collection). The final guidance emphasizes the importance of either moving forward with funding or renegotiating/walking away if due‑diligence uncovers issues. Throughout, the material is instructional, using tables, formulas, and checklists to train novice investors or analysts.
Topics
Six‑Step Commercial Real Estate Investment Framework
An overview of the end‑to‑end process: Foundation, Find, Figure, Fund, Fix & Fill, Flow, presented as icons and a high‑level roadmap.
Quick Snapshot Valuation Formula (Figure It)
A fast, back‑of‑the‑envelope calculation using unit mix, market rents, a 50% expense ratio, a 7% cap rate, and a 70% ARV multiplier to derive a maximum allowable offer.
Preliminary Proforma Structure and Income‑Expense Breakdown
Detailed layout of gross potential rent, other income, vacancy adjustments, expense categories (taxes, insurance, utilities, maintenance, management), and how they produce NOI and stabilized value.
Deal Exercise – Applying the Snapshot Formula to Real‑World Examples
Three sample property scenarios with unit mixes, market rents, asking prices, and repair costs; calculations of gross collected income, total operating expenses, NOI; and a binary decision (YES/NO) based on the maximum allowable offer.
Letter of Intent (LOI) – Purpose and Timing
Explanation of the LOI as a non‑binding outline of deal terms, its role in securing seller commitment, and the typical 5‑15 day window to move to a purchase contract.
Light Due Diligence – Financial and Physical Checklists
Initial due‑diligence tasks: gathering three years of tax returns, profit‑and‑loss statements, rent rolls, leases, vendor contracts, and a basic property walk‑through with condition report and photos.
Purchase Agreement Execution – Contingencies and Earnest Money
Key elements of the purchase agreement drafted by an attorney, including inspection, financing, reps & warranties contingencies, and the role of refundable earnest money.
Heavy Due Diligence – Deep Financial and Physical Verification
Comprehensive review: cross‑checking all financials, confirming occupancy and collections, full unit‑by‑unit inspections, specialist involvement (plumber, electrician, roofer, general contractor), scope of work, and “not‑to‑exceed” bids.