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Analyzing data - next level?

Sid23

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I'm good at analyzing numbers and data to do the "first level" of analyzation.

For example, this bldg sold at this cap, this bldg sold at this cap, interest rates have moved a point today, apartment vacancies are up, etc. I can handle this level fine.

My issue is the next level of intrepretation. My boss, for example, can read data and see that "Cap rates are moving up, interest rates are stable, home prices are going down, employment is up" and immediately say, "Great, let's go buy some apartment buildings." (NOTE: THIS IS JUST AN EXAMPLE OF TERMS. IT MIGHT NOT AN 100% ACCURATE SCENARIO)

How does one learn to connect the dots like that? Simply through repetition?

We had a deal discussion today and we own a great piece of land on the SF Bay that we've just got approved for 84 condos, townhomes and cottages. We discussed access to capital, interest rates and immediately my boss's knew they would have a hard time unloading this site. I sat there thinking, "Okay, I understand why it's hard to get capital partners right now, why interest rates are where they are..." But then was lost on how they got the next level.

Any advice how to improve with this? :iamwithstupid:
 
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Sid23

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Jscott, thanks for the reply! I appreciate the answers.
 

Poudda

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I used to work with a guy (credit manager) - whenever I pitched a deal to him, I would only get as far as telling him a few very general things, and a couple of lines on the income statement, and he would tell me the rest of the story (including more specific details on the financial data) without actually having a copy of the fianancial statements or any other data in front of him. I'm pretty confident at reading financial statements and pulling all the data from them and analyzing the particulars, but what this guy did blew me away every time. It comes down to a solid understanding and experience IMO.

Just like cap rates. I know how to calculate them, and I've been reading Burges book, but I'm still going in the back of my mind, "this doesn't make sense, why does it work like that? what's the difference between a cap rate of 7%, 10% and 15% - which is better and why?" It will come to me eventually after I research more and play with numbers on my own spreadsheets and compare them to market. Sorry, I'm rambling.

Cheers!
Dave
 

Poudda

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Sep 7, 2007
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Calgary, Alberta
Thanks JScot. That makes sense. I probably just read too much too fast, as I do remember it being explained in the book (now that you mention it) as compared to ROI. Also ran a couple of numbers on one of my properties so I think I get it now. Just have to find some comparibles in my market to see what the normal cap rate is.

Dave
 
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