Isn't Commercial Property Really About the Numbers?

I was in a meeting just the other day and the speaker was saying, "Listen guys, it is really all about the numbers, it is simple math." I got me to thinking. Are not, all of businesses about the math at the end of the day?

Every commercial building started with the land and an idea of what to do with the land, did it not? Next came the money men, did the numbers work to start the project? Would he make his money back after getting it zoned and entitled? Then the builder is brought in, could he build the building with in the budget? Would the developer make his money based on his projections of construction? Could he get a loan to pay off his construction loan? Then the leasing and management company, could they lease enough of the building to start paying for itself? When they got it fully leased, did it make the money it was projected to make?

All these things came down to math at the end of the day. Did they make more then they paid out? Is that not the true nature of business? Win and take the money to the bank? Lose and close up shop, file bankruptcy and start again.

Look at some of the developers in this current real estate down turn, a lot have folded, some are still standing, much smaller in size, however; they are still in business and still selling homes.

Commercial buildings have been built, only to stand vacant, because the tenants downsized or closed up shop.

At the end of the day it is all about the math, dollars and cents. Do the numbers work?

This is part of the training provided by the National Association of Commercial Real Estate Property Scouts. Check them out at http://www.nacreps.org/

Ted,
Professional Commercial Real Estate Property Scout