Page 89 - Trump University Commercial Real Estate 101

Ho w to Read a Deal

These numbers will tell you the true story of that property.
The profi t - and - loss statements are also called operating statements .
Make sure you get them in the form of a month - to - month trending
report . It ’ s vital that you see them each month, side - by - side, for an
entire year. Then with a glance you can see if the property is fl at,
trending upward, or losing ground.
This report will also show you how the property performs through
the seasons. It ’ s detailed enough that you can drill down and ask ques-
tions, but it ’ s not so detailed that you miss the bigger picture.
You want at least the last two years of these statements, although
some investors like to get three years. Either way, it ’ s the last six months
that you focus on. They ’ re not only the freshest results, but lenders
weigh that period very heavily when they ’ re in a loan committee,
deciding whether to fund your deal.

Insider Tip

Let ’ s say your deal analysis goes well, and you not only sign a letter of
intent to begin your analysis in earnest, but you sign the purchase and
sale agreement , also known as a P & S . That means you ’ ll be buying the
property, barring any major unforeseen circumstances.
A couple of months are likely to pass between the time you sign that
P & S and the day you actually close on the property. Do not forget to get
updated operating statements for those most recent months! Not only
will you want the freshest information, but if the numbers are trending
down, the lender may require that you put up more money to close the
deal. A good closing is one where no such nasty surprises pop up.

The Three Ways to Value Properties

As investors, we benefi t by the inexact nature of real estate prices. It ’ s
a teachable skill to spot undervalued properties. Part of that skill
involves knowing how professionals arrive at fair values for properties.
Let ’ s look at the three most common methods.

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