Supporting an equity dividend rate for band of investments?

[masmia]

How do yo support the equity dividend rate portion for a band of investments?

 

[Ken B]

Pretax cash flow / equity investment = equity dividend rate (aka: cash on cash return)

Estimated by analysis and/or survey of market participants.

Pretax cash flow = NOI - debt service

 

[masmia]

Pretax cash flow / equity investment = equity dividend rate (aka: cash on cash return)

Estimated by analysis and/or survey of market participants.

Pretax cash flow = NOI - debt service

This is EBITDA?

 

[PL1957]

This is EBITDA?

No. EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization

 

[PropertyEconomics]

One must have a good amount of data in order to reliably conclude on an equity yield rate and the data needs to be pretty good data. Lacking the data use of an equity build up method for determination of an overall rate is suspect.

 

[PL1957]

One must have a good amount of data in order to reliably conclude on an equity yield rate and the data needs to be pretty good data. Lacking the data use of an equity build up method for determination of an overall rate is suspect.

The "most believable" analysis of equity dividend rates I've seen includes a discussion of alternative investment yields, taking into to consideration an illiquidity factir for an individual real estate investment.

Bottom line, the build-up method is all smoke and mirrors.

 

[Calvin the Airedale]

One could de-construct appropriately vetted OARs (if one knew the terms of the mortgage debt) to reveal the equity yield rates.

 

[PL1957]

One could de-construct appropriately vetted OARs (if one knew the terms of the mortgage debt) to reveal the equity yield rates.

I vaguely remember doing that in my demo ...

One caveat with this method is that, you need to make sure you have the buyer's expectations of first-year NOI. Those expectations can be significantly different that the seller's or broker's.

 

[PropertyEconomics]

One could de-construct appropriately vetted OARs (if one knew the terms of the mortgage debt) to reveal the equity yield rates.

And if you have good overall rates you really dont need the band of investment .....

 

[Calvin the Airedale]

And if you have good overall rates you really dont need the band of investment .....

True, but its nice to disassemble things and see what they're made of. That way, if you ever need to build one from spare parts, you have the recipe and ingredients.