Posted by PeteH(NYC) on February 12, 2000 at 12:48:31:
Being comfortable with numbers has mostly to do with having absorbed information about the market you deal in over a period of time – there is no shortcut. The main things in my analysis that come from familiarity are (1) the fact that any property will have expenses to operate, and you need to be familiar with how much those expenses are in relation to how much income the property earns; (2) the fact that any investment, whether property, stock, bond, rare art, baseball card or jewel, can be compared on the basis of how much income that property will earn you over a period of time; (3) the fact that every area has its own “market rent,” which is what people in that area are willing and able to pay for a place to live (based on what kind of jobs they have and what sort of amenities they’re interested in paying for); and (4) the common sense idea that every investor (including you and your developer guy) is going to be motivated by a calculation of risk versus return – how much return they can expect to gain on a given investment versus the risk of losing any money. Play with those numbers and ideas enough while looking at different specific properties in your market, and eventually you get a feel for what numbers to expect.
Two books that I have found helpful for my comfort with numbers are “Real Estate Investments and How to Make Them,” by Milt Tanzer, and the “Real Estate Finance and Investment Manual” by Jack Cummings.
I wish you luck in your market.