Learn » Real Estate Concepts

What is House Lifting?

If you’re in a compact house and you’ve outgrown your home, you want to strengthen your foundation or you want to have some fun creating an extra room or face a tough time every monsoon, lifting your house a few inches off the ground has crossed your mind at some time or the other.

For all the above reasons we cited before, there’s no other solution but to dig up a new foundation by carrying on with house lifting. In this article, we’re going to take you through everything there is to know about house lifting and get you prepared for it.

Why Should You Consider House Lifting?

House lifting, although not as expensive as remodeling, or demolition and reconstruction, does need you to part with a considerable amount of money, somewhere in the range of $20,000 to $100,000, depending on which state you’re in. So, go for it if you resonate with any of the following reasons:

• Your house is frequently waterlogged when your street floods during the rainy season
• You’ve outgrown your home, and you need more space to accommodate family members
• The road level seems to rise above the plinth level of your house
• You need to add a new floor below the ground floor, for parking or other uses
• You need some extra furniture lying around, or you want to construct a garage/gym, so you’re looking for a fine basement space
• You want to repair the foundation of your house

Precautions to be Taken Before House Lifting

Turn off all utility services – water, gas, electricity, sewage, and telephone lines, etc
Split or remove your kitchen countertop and other hanging fixtures in the interior of the house
Vacate all moveable items from the house that could crumble during the house lifting
Fill windows and openings with masonry to even the load on hydraulic jacks
Build temporary walls to ensure even support

House Lifting – Step by Step Explained

1. Check the Existing Foundation

You need to check if the existing foundation has enough strength to bear the load of the addition. If you’re planning to lift the house by 10 feet, check if the existing foundation has enough strength to withstand an extra 10 feet. Without proper support, the foundation won’t be able to bear the new construction. Take some time to check the existing and proposed plans of the house to determine exactly how much the house needs to be raised.

Read also – 10 Reasons Why Landscape Architecture Is Important

2. Soil Testing and Evaluation of Materials

Bring in an architect, and/or an engineer to evaluate what type of soil you have underneath your house, right in the foundation, and determine its strength. If it has lost its strength over the years, it may not be a good idea to carry on with your house lifting. But, if it is, go ahead and check the other materials you used to construct your house – beams, columns, and walls. Only if everything is durable and strong enough to endure the house lifting will you get a go-ahead from your architect.

3. Calculate How Many Hydraulic Jacks You Need to Lift the House

To determine how many hydraulic jacks you need, use the following formula:

Total house load = Sum of dead load + live load + snow load + impact load

No. of hydraulic jacks required per meter square = Total load/Capacity of 1 hydraulic jack

If the load of the house is high, the spacing between the hydraulic jacks is low. If the load is low, spacing is high, to manage the load and distribute it evenly.

Read also – 9 Best Sustainable Architecture Design Ideas

4. Raise Temporary Walls and Support Fixtures Wherever Needed

When the entire house is lifted keeping all other things intact, you need to make sure of every little detail to make sure there’s little to no damage whatsoever to the existing structures and fixtures of the house. That’s why you remove all items in the house, support the cantilevers and other fixtures you have installed with cement and masonry, and even go to the extent of building temporary walls to get the right support you need.

5. Start Digging the Area Surrounding the House

You should start digging the peripheral area of the house. Create a strong concrete base for the walls to hold jacks, so that they don’t go down when you lift the house. Hydraulic jacks are placed in the concrete base below the beam for support, and they lift uniformly. Once you have the team dig out the depth you want for your new foundation, you prepare for the support.

6. Ensure Adequate Support for the Newly Lifted House

Wooden blocks are placed above the hydraulic jacks. Steel girders are placed above wooden blocks. The girders are filled with concrete to strengthen them to hold the load of the walls. Ensure all girders are welded together and wooden planks are placed in between the girders and the beams. The same method is followed for the internal walls as well.

7. Reinforcing the New Foundation

Pre-existing columns are removed from the foundation after the house is lifted by the hydraulic jacks. After that, the jacks are removed and parallel brick masonry is laid to support the lifted house. It takes about 15-20 days (may take more or less depending on the climate and circumstances you’re in) to lay down the new foundation. The elevated house is connected to the new foundation with new columns and walls. Backfill the soil along the peripherals of the house.

8. Putting the House Together

Set right the flooring after filling the compacted soil. After this crucial step, you reconnect the supplies and have the temporary walls removed. If the original walls of the house have some cracks or dents on them, fill them with cement grouting.

Role of Interior Designer and Architect in House Lifting

As much as you need a structural engineer and their team to help you with house lifting, you need an architect and a designer equally. Along with the engineer, they take a look at the aspects of the house that will be changed, demolished, and revamped and will help you understand what you need to prepare or modify before vacating the house for house lifting.

If you want to design a whole new basement for your house, you undoubtedly need them to figure out and design how your existing system will fit into the new basement, where the gas line will be, the electrical outlets will be, sewage will be (if you’re planning to install a bathroom/toilet) in the basement and several other items that need to be checked off before you tear your house apart and start lifting.

Just as you chalk up the house lifting and foundation improvement plans, you also need to carefully evaluate how this move will affect your frontage, your yard, your neighbor’s septic area, your water area, etc. You need a qualified architect to walk you through this crucial phase, so you don’t get into trouble later on with your neighbor.

Another important activity you need an architect with you for is soil testing before commencing the house lifting project and getting the necessary approvals from the authorities concerned. The engineer will coordinate with their team. But, to coordinate with other vendors, and material supplies, follow up on schedule, and ensure the project is done to the best of quality, you need a qualified architect and designer.

Since the interior and exterior walls may have a chance to crack under pressure, or when they’re being lifted, and the hanging fixtures on the interiors and exteriors are going to be modified or supported, you need an expert designer to guide you through how you can support the structures carefully (to preserve their structure and aesthetics) without having to incur damages during the house lifting process.

After the house lifting, your interiors and exteriors have a good chance of needing a revamp, and a touch-up to make them look as good as ever. Guess who you need by your side? You guessed that right.

Real also – The Difference Between Architecture and Interior Design

How Can Foyr Neo Help You Prepare and Execute the House Lifting Process?

Given that your home’s site plan is unique, how do you know which level of house lifting you should do? You figure it out by visualizing your house at different levels with the structures you want and ruling out the ones that don’t fit in.

How can you visualize every space of the house and foundation without leaving anything to chance? With an advanced tool like Foyr Neo.

Here’s what you can do:

• Step 1: Sign up for Foyr Neo’s 14-day trial.
• Step 2: Go on to the Neo mood board and curate everything you’d love to have in your house
• Step 3: Create your home’s site plan on Neo.
• Step 4: Choose from 60,000+ 3D pre-built materials and simply drag and drop them into the design
• Step 5: Get any material in any color scheme, texture, shape, or pattern and truly customize your dorm
• Step 6: View the makeover in 2D and 3D, from all possible angles and lighting conditions.
• Step 7: Render your design in a few minutes and witness your house’s new plan in all its glory.

That’s all it takes! With 24/7 support and live chat, we’re here to help you if you ever get stuck anywhere. You can find tutorials on how to design on Neo all over the internet, so you’re never truly alone when you design using Neo.

FAQs

What are you waiting for? Start curating your mood board for your home, sign up for Foyr Neo’s 14-day free trial today.

Learn » Real Estate Concepts

If you’ve been wanting to compete with premium interior designers with your exemplary skills but don’t know how to make the cut, the best place for you to start is to get robust residential design software.

You’ve been hand drawing forever and you need a tool that can bring designs to real life in a glorious form. Although that’s a must for you to grow a flourishing business, you need to consider an all-in-one residential design tool that saves you money, increases your revenue, and garners a great name for you amidst your clients. When you browse the internet for the best home design software, you will witness a cascade of options such as Roomsketcher, Homestyler, and SketchUp.

That’s why we’ve put together the top 11 residential design software programs to help you make the right decision that will impact the course of your business over the next year.

Hop on, let’s go over the tools one by one. 

1. Foyr Neo

Foyr Neo is by far the best interior design tool you can ever find in the market.

Having garnered 152 reviews on Trustpilot and won hearts across the globe, Foyr Neo is tailor-made for anyone to create designs and impress clients. With exemplary rendering quality and a bunch of features, it works best for interior designers who aren’t tech-savvy but want smooth, superb designs, 4K walkthroughs, and high-quality 3D renders.

Foyr Neo starts at $44 per month and goes up to $99 per month in the premium plan.

Foyr Neo Pros

• Super-fast, crystal-clear rendering quality.
• Great for designers and homeowners alike.
• 10,000+ preset design templates to start designing right away and collaborate with others easily. 
• Intuitive, user-friendly UI saves you hours of time otherwise spent in designing and rendering.
• 24/7 live support via email and chat
• Super short learning curve that you can master in a few days. Doesn’t need external plugins.
• Plenty of user guides, design documentation, tutorials, and a comprehensive product tour.
• Auto-lighting, auto-punching, and auto-adjust features help you carry on with your home design projects without wasting time.

Foyr Neo Cons

• Works only on laptops and desktops, and not on mobile phones. 

2. Vectorworks

Vectorworks is known to have one of the most powerful 3D engines and that has been used extensively by professional architects over the years. It’s a highly recommended full BIM application in the design community.

Vectorworks stands to be quite expensive starting at $210/month, after the free trial.

It’s great for small and simple projects, but if you want to create designs for an intricate, high-end, heavy detail-oriented project, this won’t fit your needs.

Vectorworks Pros

• The entry price is cheaper than other old, famous interior design software.
• A steep learning curve takes a lot of time to get familiarized.
• One place for design, rendering, design documentation, and collaboration with other stakeholders – builders, contractors, architects, etc.
• Plans, elevations, and the detailing you do on Vectorworks are easily readable and instantly usable for construction.
• Customer support is great, the brand accepts your element and color suggestions readily. 
• 2D to 3D switch available.

Vectorworks Cons

• Too many buttons make it hard to navigate within the tool. Mediocre collaboration features.
• Obsolete elements in the library make your home design projects look dated.
• Modifying small details such as line weights, and color combinations, variety is pretty easy. 
• Modeling, importing, and exporting designs are lined with glitches.
• Crashes frequently, without any reason, and stalls your design process. Every time you switch from a home desktop to a laptop, you have to call the brand and reset your license.
• Problematic, glitchy switch between 2D and 3D.

Read also – 9 Best 3D Floor Plan Software and Tools in 2023 [Free + Paid]

3. ArchiCAD

An all-round home design software used for years by architects and interior designers alike, ArchiCAD is a tool that constantly updates and works well with other tools you may use for different stages of the design process.

Although it’s a popular software, it costs you $300 per month after the free trial and exhausts you before you finish learning its nuances. For a beginner looking to make a mark, and a pro looking to bag blue-chip deals, ArchiCAD’s price and learning curve are too steep.

ArchiCAD Pros

• You can easily export design and plans to other tools and continue designing.
• Offers a range of tools to work with from ideation to design and building documentation. 
• Works well in 3D modeling and a clear 3D view of your designs helps you identify errors and fix them.
• If you need custom objects, ArchiCAD enables them instantly.
• One place to manage all your projects and access them easily. 

ArchiCAD Cons

• Unreasonably expensive.
• Average rendering quality compared to the price the tool charges. 
• If you want a detailed visualization of your designs, you will have to wait a long while. If you have multiple elements on a wall or overlapping one another, you can lose a few elements altogether in the overlays.
• Limited library for electrical fixtures and door options. Cannot personalize designs for your clients. 
• The search option in the library and in the design bank doesn’t work well and can make searches painful.

Read also – What Is Generative Design? How Generative AI Can Influence Interior Design?

4 . 2020 Design

A low–cost, yet powerful tool for designing residential projects with 3D, HD quality. Truly easy to learn, design, and ace with the tool. Detailed tutorials will handhold you, get you acquainted, and start your design process effortlessly.

Customer support is acclaimed and valued by customers across the globe. Priced at $1559 per year, it rounds up to $133 per month, after the free version. Reviews also state that the payment renewal process is cumbersome.

All things aside, you need a lot of patience to work with 2020 Design, work your way through its confusing features, modify elements, adjust them, place them in order, and finalize your design.

2020 Design Pros

• Quick, thorough 3D designs are suitable for creating unique designs.
• You can download any object from the internet and add it to your library.
• The integration of factory-line cabinets, appliances, and in-vogue elements from all major brands is commendable.
• Changing features of elements – style and color is easy.
• Great lighting features that help you give super-realistic presentations. 

2020 Design Cons

• Hard to log out and log in to another device. Frustrating to work with. Super slow cloud-based engine. 
• When you download and place any object in the design, it floats around and disturbs the design. No auto-adjust features. 
• Cannot switch between 3D rendering, and design simultaneously. The system crashes automatically. 
• Too many clicks and steps to get even simple things done. The system isn’t intuitive and takes a lot of time to adjust. 
• The lighting is great but has frequent issues that need sorting. Rendering is troublesome and keeps you waiting for a long time.

Read also – 30 Jargons and Other Popular Terms Used in Interior Designing: A Comprehensive Guide

5.  HomeByMe

A great tool with a vast library of choices. The tool has ease of use, and learning, and lots of free designs in the free trial. With this tool, you have room for full customization for your clients.

A one-time fee of $16.50 gets you 5 projects and for $29.99 you get an unlimited package.

HomeByMe Pros

• Multiple readymade templates for design made seamless for new designers. 
• You can easily switch between 2D and 3D and fix any design issues. 
• The material library is vast and the choice of elements is quite impressive. 
• You just need to drag and drop elements and your design is done.
• Alternating distance between walls is pretty straightforward. 

HomeByMe Cons

• Switching between different scales and measurements is not that simple.
• Images and design are of low resolution. Designs are all watermarked. If you want high-resolution photos, you need to pay a lot more.
• Tutorials available in the tool are confusing and need extensive guidance from the support team to get through.
• The UI is average and takes time to open the application. Manipulating the position of objects is difficult, and the app keeps crashing. 
• Adding or changing anything in the wall placement is complicated. The same goes for water, pool, or roof effects.

Read also – What is 3D drawing and how is it transforming interior design?

6. SketchUp

An industry favorite, SketchUp is every beginner interior design professional and architect’s go-to design tool. With a ton of plug-ins to enhance core functionality, SketchUp gives you access to different tools that make designing and iterating easy.

Clients will have a tough time understanding your design intent because of the difficulty of creating photorealistic, hyper-personalized designs.

After the free trial, you will need to shell out $119 per year for the starter package, $349 per month for the Pro subscription, and $749 per month for the Studio subscription. 

SketchUp Pros

• Simple, easy-to-use design tool.
• Intuitive home design software for designers in every stage.
• You can download multiple 3D elements from the warehouse for free.
• Great for conceptual design and for shaping details.
• For rendering or walkthroughs, you can set your own camera angles and views. 
• Ultimate control over what you can or cannot export. Seamless exporting of textures and finishes. 

SketchUp Cons

• For the features it has, the modeling and rendering are below average, unless you get a plug-in.
• Very difficult to navigate in spaces beyond 10,000 square meters. The greater the scope of your design, the tougher it is to deal with the tool.
• Doesn’t work great on curved surfaces and needs a lot of compromise. 
• Not recommended for large or complex models, as you won’t be able to furnish intricate details clearly without glitches. 
• SketchUp makes it difficult to collaborate with architects and lighting designers. Mediocre lighting in the tool can only be made better by using external home design software, especially kitchen design.
• Cannot be a standalone tool, it needs multiple plugins and integrations with other tools to get any high-quality design done.

Read also – 10 Best SketchUp Alternatives for Designers in 2023

7. Revit by Autodesk

A common favorite in the architecture community, Revit is a powerful and costly tool that needs time and monetary investment to move you from the novice to the pro stage. It is slowly becoming user-friendly after having a super steep learning curve for all these years. Revit still takes a long time to learn and use, let alone master it.

However, it is widely recognized by clients, builders, and employers all over the world.

The standard plan itself starts at $350 per month, which is almost insurmountable for beginner interior designers who are looking to land deals and make money before investing a bunch of money in tools. You need a quick start and something to keep the business flourishing for a while before you’re even thinking about tools.

Revit Pros

• Amazing 3D visualization.
• Plans, details, and sections of the design update and improve automatically as you design. 
• Switching between 2D and 3D is easy. 
• Tons of options for walls and floorboards to customize designs. 
• Good quality rendering.
• VR feature is available.

Revit Cons

• Super expensive, and difficult to learn and navigate. Not recommended for beginners. 
• Rigid, limited features that deteriorate the quality of designs.
• Glitches too often if you don’t use high-spec hardware. Doesn’t work for iOS operating systems.
• Can’t experiment with designs and features. 
• Takes hours and hours to finish rendering, and to achieve high-quality renders. 
• It can be limiting if you plan to design and model huge areas as it takes several hours. For advanced and crystal-clear models, you have no other go but to use Photoshop.

Read also – The Importance of Lighting in Interior Design

8. Sweet Home 3D

A completely free home design software is ideal for new home design, home renovation and planning. It can easily be integrated with other tools and third-party design apps.

Known for being beginner-friendly, Sweet Home 3D is excellent for homeowners and interior designers to make amazing designs and view them in 3D. Material searches are shortened with a simple, effective search bar. For a free tool, it offers plenty of superb features, but they are only applicable as long as you’re designing simple projects.

Sweet Home Pros

• Simple, straightforward UI and intuitive software.
• Has a ton of features to create a variety of designs in 2D and 3D. Great for presentations.
• You can leave notes in your designs to come back and work on them.
• Multiple templates and materials to customize and make your work easier. 
• You can get clear visualizations and walkthrough videos of the interiors.
• Can be used for interior design only.

Sweet Home Cons

• Only suitable for beginner-level projects. Super slow navigation within the tool.
• No plugins or libraries to match modern requirements or rendering quality. 
• Not recommended for advanced, detail-oriented designs. Difficult to get the dimensions right and change them.
• The toolbar is a hassle. You need to keep multiple tabs open parallelly to complete one design.
• Visualizations are subpar and cannot match present-day client demands. Rendering is too slow and falls short of expectations. 
• Designing exteriors, backyards, and front porches is difficult and it isn’t a great landscape design software.

Read also – What is Leed Certification: How to become a LEED certified designer?

9.  Lumion

Lumion is a realistic rendering tool, with a simple learning curve that helps beginners and professionals design and render classy designs in no time. The tool’s customer support is commendable. Despite the tool’s issues, customer support seems to come to the rescue of the user on time.

You can choose between a yearly plan of $749 per month and you can also proceed to a 3-year plan which is on the higher-end.

Lumion Pros

• Easy, effortless renders in a few hours with superb quality.
• Make animated videos of your design.
• You don’t need to go over many tutorials to learn how to navigate the tool. It’s fairly intuitive. 
• Rich material library in place.
• Make quick fixes in the design to finish renders in one go.
• Change environmental conditions in your design (rain, snow, sunrise, sunsets, etc), without spending hours working on it.

Lumion Cons

• If you need clear 3D renders, you need to invest heavily in expensive plugins.
• Difficult to edit camera positions to view designs.
• The tool crashes often and takes too long to function normally. Totally depends on your computer’s processing power. 
• The library has templates in place but makes it hard to customize them. 
• Consumes a lot of memory, and takes time to process every single change you make in the design.
• The lighting feature is mediocre and concerning and affects the quality of your renders.

Read also – Top 10 Interior Design Trends in 2023

10. Home Designer Suite by Chief Architect

A great tool to learn the basics of interior design, that is easy to draw with and customize. You get a free trial of 30 days that you can test out with your MAC and PC. You can either rent it or buy it for $99 for a very few designs.

The hard part is that you will have to learn on your own, there aren’t as many tutorials to educate you on the nitty-gritty of the tool.

Home Designer Suite Pros

• Easy to draw, and change dimensions. 
• Works well in 2D, 3D, and in split screens.
• You can customize designs to a great deal and to fine detail.
• Generates intricately detailed designs that can be readily used for construction. Decent rendering options.
• You can either rent it or buy it.
• Easily group products together and move them across your designs seamlessly.

Home Designer Suite Cons

• Takes too much time to decipher commands and has a steep learning curve.
• 3D viewing and modeling consume a lot of time and effort. 
• Hard to manually draw and customize every time you need to modify existing templates. 
• Essential features need to be integrated as add-ons for excellent designs and rendering.
• Pretty expensive home design software that needs advanced, high-power hardware requirements. 
• Outdated furniture library that can’t be used for present-day designing. You can’t shortlist elements or star them to use later.

Read also – How Interior Designers Choose Flooring for Interiors

11. AutoCAD Architecture

One of the oldest design software to be used over and over by architects, and interior designers. Works well with 2D and 3D, but needs heavy investment upfront and takes eons to learn and master it. You can manage end-to-end projects and documentation on the tool and access them anytime.

You also have a great customer support team to help out.

AutoCAD Architecture Pros

• OK for collaborating with clients, builders, and other stakeholders.
• Accurate home plans, elevations, and designs are created with good quality.
• Does a lot of functions from blueprints, and floor plans to rendering, and is great for 2D drafting. 
• High-end rendering is possible but needs extra tools to make it happen. 

AutoCAD Architecture Cons

• You need a lot of time, patience, investment, and practice to understand the most basic commands, and is overkill for a beginner.
• Needs advanced, high-power systems and hardware to work, and crashes often.
• Severe performance issues and cannot be integrated with other software. Moreover, you need other tools to process the output of AutoCAD Architecture to get a decent design.
• Very expensive, and has a steep learning curve.

Read also – Importance of Mood Boards In Interior Design

What should you consider before finalizing your residential design software?

One of the main things you would love help with as a designer is to narrow down choices for clients and get them to make smarter choices for their dream homes. A fantastic tool that shows them how each material, texture, color, and finish looks also prevents any wastage, or losses for them.

Clients want you to interpret their wishlist and incorporate the best of all their favorites in one design. With a superb computer-aided design, you can make iterations and help them visualize their future better. When this design time is saved, you can spend those hours building relationships with your clients.

Here are the criteria to evaluate before choosing your go-to residential design software:

• Design quality and tutorials
• Timeliness and customer support
• Cost and pricing
• Rendering time and quality
• Frequently updated
• Vast library to choose from
• Intuitive, interactive UI
• AI-assisted lighting

Sign up for Foyr Neo’s 14-day free trial and experience the best of interior design today.

Have you ever thought of finding out a quick fix solution to value commercial properties, before buying it? Have ever questioned yourself which is the best barometer in vogue?

The most common way to determine the fair valuation of a commercial property is through Gross Rent Multiplier which is the ratio of the price of a real estate to its scheduled monthly rental income; before deducting operating expenses such as utilities, property taxes, insurance, etc.

Image credits: pexels.com

In other words, the GRM is the number of years, a property would take to pay for its cost – a lower GRM is always desirable for a prospective real estate investor. Gross Scheduled (monthly) Income is the potential revenue from a property if it is 100% occupied.

While on first instance it might look a little tricky affair, but on the contrary, it is quite easy to calculate GRM, as long as you are privy to some basic information. In fact it is expedient and a less complex valuation methodology and due to its simplicity, multiple properties can be scanned efficiently.

This ratio can be used to compare similar real estate investments in a given place. It is the approximate value of an income producing commercial property and hence is and it a very precise tool to get the true value of a property. Though GRM is a simple and popular
method of gauging the investment verticals in the commercial real estate industry, it also has several built-in limitations, which we will discuss one by one, as we go deeper into the topic.

Example: Say, when a property is rented at Rs.1,200 per month, it produces annual revenue of Rs.14,400 in terms of rent. Now if the price of the property is 1,44,000, then:

Gross Rent Multiplier (GRM) = Property Price / Gross Rental Income = 10.

So what does this GRM of 10 mean?

It means that an investor must be willing to pay a multiple of 10 on the gross annual rent to buy this asset. Which when extended means that when you are comparing this factor with similar properties in an area it can throw before you potential acquisition opportunities; if one of the properties has a smaller GRM than the others. In calculating GRM, it is the annual figures which are used and not the monthly ones.

If the Gross Rent Multiplier or GRM of the property is too high or too low, as compared to the recently sold comparable properties then probably it indicates that either there exists some problem with the real estate asset or it is a case of gross-over pricing.

Let’s break this subject a bit further:

Say we’re comparing two commercial real estates — one that fetches Rs.5,000 in rent, and another that collects Rs.5,500 in rent. We will have to contextualize those numbers against property cost. If both the properties cost almost the same price, then the one which gives a rent of Rs.2,000 is the better deal. Right?

But wait!! What if the two properties are perched at different prices? Then?

Image credits: pexels.com

Case I:

The price of Property A = Rs.20,00,000 and it generates a rent of Rs.5,000 per month

Case II:

The price of Property B = Rs.11,00,000 and it generates a rent of Rs.3,500 per month
How to find out in a simple way, which is a better bargain? Here is what GRM will help us.
Hence, using the formula of, Gross Rent Multiplier or GRM = Property Price / Potential Gross
Rental Income, we get:

GRM1 = Rs. Rs.20,00,000/Rs.5,000 = 400 month
GRM2 = Rs. 11,02,500/Rs.3,500 = 315 months

Therefore, using the Gross Rent Multiplier method we find that Property B is a better
option since it pays its price earlier than the Property A.
The GRM gives a fair comparison among the properties at a place. It is similar to the price-
to-earnings ratio or P/E ratio in stock or share market — it is one of the major parameters of
valuation of commercial real estates, but not the final word in the realms of real estate
investments.

Now, as a corollary, we can also find the price of a commercial real estate, if we arrange the
GRM equation in the following manner:

Price = Potential Gross Income x Gross Rent Multiplier.

Advantages:

➢ The biggest advantage of the GRM metric is that it requires very little information to
process the valuation of commercial real estates, giving it a level of an easy tool.
GRM can be used to quickly survey any market by filtering out properties with a low
price relative to gross potential income.

➢ GRM overcomes the inherent flaws associated with Price-per-unit concept for
comparing similar properties; since the former considers the rent roll or income
stream while the latter doesn’t.

➢ Because the GRM is a ratio of price and rent, if one of the variables changes, the
outcome will also change; thus giving a seller or buyer an indication whether the
price of a property is a bit higher or lower side than the overall market condition.

➢ Rent of a commercial real estate is market driven or it depends how much a tenant is
willing/able to pay. By factoring in a market-driven data point (income), GRM is a
reasonably reliable instrument, especially in areas where operating costs are more
or less uniform across the domain.

➢ Although it is implied that this is not a good valuation model, it does suggest a "back
of the envelope" swift route.

Disadvantages:

➢ Since it takes into account gross instead of net income, GRM fails to differentiate
among properties with lower or higher operating expenses and vacancies.

➢ It is a rough valuation technique and hence changes in interest rates or inflation can
distort the outcome in the short term.

➢ This method assumes uniformity in properties across similar bracket, however,
expense ratios among such properties often vary widely, due to factors like deferred
maintenance, property age and the quality of property managers.

➢ In this system the estimates are based on gross rental income, while a property is
purchased based primarily on its net earning power (NEP); bringing about
aberrations. It is highly possible that two properties can have the same NEP even
thought their gross incomes or expenses may differ significantly; leaving a possible
conduit for misuse by the charlatans and swindlers.

➢ This modus operandi doesn’t take into account, the economic life of comparable
properties. Thus, there are likelihoods that a new property or a 50-year-old one
might be assigned the same rate by an inexperienced real estate investor;
considering that they generate equal incomes.

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Conclusion: There are generally three primary methods of valuing a commercial real estate:
o Sales comparison approach,
o Cost approach, and
o Income capitalization approach.

Gross Rent Multiplier though comes under the approximate income approach, it is normally
not used by professional to find out accurate estimates buy or sale price in a given
marketplace. However, as mentioned above, I reiterate that it's simple and saves time as it
uses information that is easy to obtain.

It should be used basically to filter potential investment scopes from a large pile of
properties hanging from the same tree, saving you from the drudgery of hours or even days
worth of complex calculations.

Moreover, since many properties don’t consider every expense in their public listing, it
might take considerable time and effort to jot down the data towards finding out a detailed
expense report. Herein GRM comes handy, without piecing all the information from the
jigsaw puzzle.

With the abundance of information available online, it should be fairly easy to calculate the
GRM of commercial properties from cues, culled out from online commercial real estate
websites, research providers or real estate agents/brokers.

Therefore, you should always keep in mind the above limitations and use it along with other
financial metrics like a full discounted cash flow analysis, to get a reasonably accurate value
of an apartment in an area.

In the end, it can be concluded that while the GRM approach of determining the value of
commercial property has its shortcomings, it actually gives a ballpark value which is actually
quite accurate and makes sense once you are well aware of the basics of commercial
appraisals.

Learn » Real Estate Concepts

Comparative Market Analysis (CMA)

The real estate market is always booming, or so we think. With real estate investments and opportunities for expansion shooting through the roof, we thought it is only rational to discuss the comparative market analysis spectrum so you know what to expect when you indulge in property deals.

What is comparative market analysis (CMA)?

Comparative market analysis, which is also called CMA, is the concept of comparing prices.

In a certain area, you will find veritable highs and lows in active listings. These selling prices are influenced by several factors but the concept of how these home prices differ is CMA.

In short, comparative market analysis is the prices of the comparable sales of each property in a certain area based on the square footage, lot size, floorplans, and interior valuation.

If you’ve put a property on the market then your realtor or real estate agent would have defined an asking price and a price at which you actually sell the property. This is a phenomenon used by different realtors to acquire listings based on comparative pricing techniques.

Read also – What Is The After Repair Value (ARV)?

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Every subject property has an allocated lot size which includes the house itself and the landscape, gate, and fencing. The interior of the house is measured in square footage. The valuation will vary based on the charge per square foot.

A single-family home cannot be compared with one that has three bedrooms and massive infrastructure and open floor plans.

Read also – Sell Your Architectural Services Better

A newly constructed property will be up to the recent building code and comply with current zoning laws. However, even if a relatively new property is not up to code or in a run-down condition then the property value will be a lot less as compared to recent sales of similar homes.

The current market value of an old property will be appraised based on the value of the neighborhood, its advancements, and similar properties that were sold in the past three months.

If the homeowner and property consultants or real estate investors endowed upgrades to improve the aesthetic appeal and the standard of living, then property values will rise.

Upgrades such as fireplaces, built-in appliances, etc. can add zest to the home which h appeals to homebuyers. Similarly, renovations to improve the condition of an old home such as an interior makeover, landscaping, and adding a swimming pool, could escalate the price of a property.

Read also – The Gross Rent Multiplier (GRM) in Commercial Real Estate

The comparative market analysis will also check the accessibility of the house with that of similar properties. So, if the location is close to a school district, supermarkets, hospitals, and other necessities, then the valuation of the property will be higher. However, if the property is located on a remote road that is inaccessible with ease, then the comparative market analysis will show a lower value for that property.

Based on the factors mentioned above, your real estate agent will determine a CMA report for your property. They will enlist comparable homes, competitive offers, and conclude the home’s reasonable value based on sales of similar properties in the area.

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Here’s what the reports usually contain:

These are the properties that are up for sale in the current market. The sales prices don’t really impact the CMA because each homeowner will have their own asking price based on the suggestions from their listing agents. It does matter to homebuyers though because they can get competitive offers on their purchase.

Read also – Flood Certification on a Property

After a certain point of time, when active listings have not been sold, they become pending listings. At this point, homeowners need to have a discussion with their realtors and determine if they need to slash the prices without incurring a loss on their property value.

Any property that was sold within the past three months serves as comparable sales. These are the properties that homebuyers and listing agents will compare to your current property. Based on these sales and the pending listings, a licensed appraiser can determine a fair market value and listing price for your property.

The property listings which do not account for any substantial sales, end up being canceled. The cancellation may be because of various reasons that we shall discuss in a minute. The most common reason, however, is the increasingly high price as paralleled to comparable properties in the region. These listings are removed because they do not appeal to buyers and yield no results.

You can get an idea of what each of these listings means by simply going through property lists on realtor.com and similar housing market websites.

Read also – What is a Commercial Lease Agreement?

Depending on the circumstances of the seller and the changing market conditions, here are a few reasons that listings may be canceled over time:

Oftentimes, when a homeowner wants to list a property, real estate agents will suggest a few basic repairs and renovations so homebuyers fall in love with it in an instant. However, there are times when a buyer absolutely loves the property but wants the owners to make a few more adjustments, maybe consider some hard repairs, etc.

Homeowners may not be looking forward to spending more money on repairing a property that they want to sell because they have other interested buyers. The buyers can back out at any moment due to their trepidations and by the end of the day, the owners and listing agents are left with the property as it is.

If the homeowners and homebuyers cannot come to a settlement and the property stays on the market too long then the price begins to decline. This is when real estate professionals suggest canceling the listing permanently or at least in a temporary capacity till the owners can make the necessary adjustments.

Read also – How To Calculate Commercial Rent?

If a property does not appeal to homebuyers and stays on the market for too long, it starts to lose its appeal. New buyers may be put off when they see that the property has been listed for an extended period of time with no takers. It creates a negative impact.

Hence, real estate professionals insist upon canceling the listing and withdrawing the property for a few days. Then they re-list it and the subject property appears as a new listing on the websites and the housing market. This attracts new buyers because the property listing is presumably fresh on the market and has a lot to offer.

Homeowners and realtors can take the downtime to revamp the property ad to entice their target demographic.

Read also – 8 Best Decor Ideas To Furnishing A Small Apartment

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Often, property listings may be canceled because the realtor or real estate agent did not promote it adequately so the listing was overlooked. It may also happen that the homeowner priced the property at a much higher value than other properties with similar features, square feet, and the number of bedrooms. It is possible that the property was in dire need of repair and the owners did not take sufficient action.

In any of these cases, the listing stays on the market way too long with no interactive communication between interested parties. Thus, the property listing is canceled or removed or it simply expires.

The owner can revamp the listing and place it back on the market with a different, competitive realtor or make the necessary changes to the property in order to make it more appealing to buyers.

Read also – 9 Tips To Improve Your Architectural Visualizations

Often, homeowners are so focused on the profit they can make from selling a property that they assess it much higher than their actual valuation. They’re not entirely wrong. They may have spent a ton of money in repairs, renovations, and upgrades but making a pricing decision while ignoring the comparative market analysis report results in expired property listings.

Buyers will compare the features of the current comps and determine if the sales price is worth the home’s value. If it falls short, then the property remains unenticing to a point where the realtor or listing agent will suggest removing or canceling the listing.

The homeowners and real estate professionals need to come to a rational compromise and reinstate the listing at a lower price or competitive pricing as compared to similar properties.

Read also – How To Design Your Dream Home?

Last but not least, the seller of the property may encounter a personal predicament or realize the emotional attachment they have to the property and decide not to sell.

It is possible that the seller was only looking to sell the property because they had to pay back lenders or mortgaged the house. It could be that they planned on moving away but changed their minds. It could also be simply because they were previously unencumbered by the emotional hold of stones and brick but suddenly remembered the good times they had and the memories they built in the house.

This causes them to back out of the deal and the listing is ultimately canceled due to seller’s remorse.

Read also – The Average Salary of An Architects

Conclusion

Creating a comparative market analysis can be very time-consuming and cumbersome. If you have a dedicated realtor, they will provide realistic CMA reports based on thorough research.

You see, comparing two properties is a Herculean task because each has its own selling point. You can’t compare a set that is not completely equal in all its measurable appeal. A new home cannot be compared to a ten-year-old property even if it has similar square footage. Similarly, a furnished home with state-of-the-art upgrades must be compared with the current market value of similar properties, not an empty house. That’s what determines a fair market value.

Therefore the listing agent will need to determine the property value based on other homes of the same condition, age, curb appeal, size, and upgrades. You can take a look at current market values of properties with differences and similarities in any location on Zillow to get an accurate idea. These property listings may appear similar but if you take a closer look, you will find nuanced differences in the interiors, condition, features, and a lot more.

When we talk about leasing commercial real estate, there are three important types of commercial leases that you can choose from.

Net lease – The first type is the Net lease. According to the United States Commercial Real Estate Association, the net lease is the most affordable and reasonable form of a lease agreement that the tenant pays to the owner.

These highly efficient lease terms dictate that the tenant paying for operating expenses such as the real estate taxes, maintenance costs, their own utilities, structural repairs, property insurance, and additional expenses.

Since these leasing agreements define that all operating costs are borne by the tenant, the base rent for the property is considerably lower. Simply put, the monthly lease options are calculated after deducting the operating costs on the property thereby resulting in lower base rent.

The types of net leases are:

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The single net lease is bifurcated into property or building expenses that the tenant pays based on the usage of maintenance fees incurred on the square foot of property they lease. They pay for the janitorial services, the base rent, and a percentage of the total maintenance costs incurred in accordance with the overall space that they have leased in the building.

This type of Net lease requires the lessee to pay only one of the net costs which is the property insurance apart from their obligatory costs, hence the name.

Read also – The Gross Rent Multiplier (GRM) in Commercial Real Estate

In these double Net lease agreements the tenant pays for building insurance and property taxes along with the base rent and their own utilities while the landlord pays for any structural repairs on the property and the costs incurred on the common area maintenance.

This type of lease agreement requires the lessee to pay for two of the major net costs incurred on commercial spaces, i.e., the property taxes and building insurance, thereby it is called the double net lease.

In triple net lease agreements, also known as the NNN leases, the tenant pays for all utility costs incurred throughout the property including the common area maintenance costs and structural repairs. The property owner is excluded from charges as per the lease terms discussed former to signing the lease agreement.

These lease agreements offer the lowest amount of rental rates as the lessee is required to cover the three major net costs incurred on the property. They are the building’s property taxes, the building insurance, and building maintenance costs, thereby naming it the triple net lease.

Read also – What Is The After Repair Value and How To Calculate ARV for Real Estate?

This is an extension on the triple net lease where the tenant must pay the base rent, property taxes, property insurance, and maintenance costs along with any additional expenses incurred on the property.

The gross lease agreement entitles the tenant to pay the agreed-upon amount for the retail spaces which include the property rent, maintenance fees, costs of janitorial services, and utilities. The property owner accumulates the total rent or full-service lease amount received from the tenants and proceeds to pay for all the property management services and building expenses.

Please note that the gross lease option does not cover building or property insurance. Therefore, if you deem it necessary then you must either discuss the terms with the property owner or pay property insurance on the square foot of the building that you lease.

You can opt for a modified gross lease wherein the tenant must pay the base rent at the beginning of the leasing period along with a percentage of the property taxes, maintenance costs, and insurance premiums paid by the landlord.

Read also – Flood Certification on A Property

Lastly, the percentage lease is a form of lease agreement where the tenant or lessee pays the base rent on the percentage of the overall property they utilize along with a pro-rata share of the revenue. The lease terms must thoroughly specify the percentage of pro-rate share of terms of total revenue earned in a monthly, bi-monthly, quarterly, or yearly option as per the convenience of both lessee and lessor.

The percentage lease agreements strictly apply to large commercial buildings such as malls, retail spaces, chain stores, etc.

Read also – Commercial Interior Design Ideas

Regardless of whether you are a property owner or a tenant, you must be familiar with the following terminologies in a lease agreement:

a) Base rent:

This is the base amount that you pay on the property you rent from the landlord. It is determined based on the deductibles on your property.

b) Rent information:

These include the terms of the lease agreement specifically the late charges incurred on rent and maintenance fees, due dates for payments, break-ups of the rental terms, and late fee allowances.

c) Fixed lease:

Here the duration of the lease agreement and its termination period is specified at the time of signing the lease agreement.

d) Periodic Lease

In this type of lease, the duration of the tenancy is open-ended therefore the tenant can renew the lease for as long as the landlord permits.

e) Maintenance fee:

The terms specifying what percentage of the maintenance costs the landlord pays and the amount to be borne by the tenant.

f) Structural repairs:

It specifies whether it is a full-service lease where the landlord pays for structural repairs or the tenant bears the costs on net leasing.

g) Property insurance:

The compensation you are entitled to as a property owner or tenant as per the contractual agreement.

h) Operating costs:

These signify paying your own utilities while partaking in the operational costs in common area maintenance of the overall property.

i) Access rights:

This is a binding agreement to specify who is allowed to conduct business on the premises and what rights they are entitled to.

Leasing a commercial property is a viable solution as property taxes and charges incurred are widely minimized for both the tenant and the landlord. Both parties stand to gain substantially which gives them a financial edge.

Learn » Real Estate Concepts

Commercial Lease Agreement

E-commerce may be the new fad of this century but having a commercial space where customers can check out your products, build a connection, and develop brand loyalty is still a grave necessity for any business operations. However, the whole debate around leasing personal property vs commercial property often confuses business owners and tenants.

Why don’t we discuss the phenomenal concept of commercial lease agreements so you know what to expect with these legal documents…

Read also – Types of Commercial Leases

A contract that is drawn between the property owner or landlord and tenant or lessee is called a Commercial Lease Agreement. This legally binding treaty signifies that the occupancy of a piece of commercial real estate is now relinquished to the tenant for a certain period of time for business operations only.

A commercial lease agreement is very different from a residential lease agreement where the leased premises are only allowed to be used for residential purposes. The ordinances of commercial leased properties state that the lessee must not use the commercial space for residential living. The commercial property and its common areas must only be used as office space, warehouse, manufacturing, and other commercial uses alone.

There are different types of commercial lease agreements that contain specific terms about the net lease, usage by square feet or entire blocks, duration of the lease, the process of rent payment, the allowance of storing hazardous materials, and the exclusivity of the tenancy. The governing laws are strict regarding the terms of lease therefore, if you’re a new tenant, you certainly need some legal advice.

Make sure to study the legal documents properly and make note of the waivers, warranties, conditions on tenant defaults, property damage, rent increases in certain intervals, based rent, additional charges, and any penalties on subleases.

Commercial lease agreements are better for businesses rather than purchasing a property because you can move your business at any time by simply terminating the lease agreement and it also costs a lot less in comparison.

Read also – How To Calculate Commercial Rent?

There are six distinct types of commercial lease agreements. Let us take a look at them:

A net lease states that the tenant pays not only the specified rent amount but also for some or all of the property taxes, maintenance fees, and property insurance.

The double net lease specifies that the tenant must pay the base rent along with all the property taxes, and property insurance.

The triple net lease or NNN agreement terms of lease specify that the tenant pays the base rent plus any maintenance costs incurred. They must also pay for property insurance and property taxes for the leased premises used by the business entity.

The Absolute NNN-lease is an all-encompassing agreement wherein the landlord is remitted from any responsibility and the tenant’s business must pay for all the necessities. It includes base rent, property taxes, maintenance costs, and property insurance. The tenant may also be entitled to pay for any property damages and costs incurred to fix or maintain the common areas of the building itself.

Read also – What Is The After Repair Value (ARV)?

A gross lease is also referred to as a fully-serviced commercial lease agreement. These are used for a short duration of leasing wherein the tenant does not have to pay all the additional charges separately. Instead, the rent amount includes an inclusivity clause that comprises the base rent and any other charges that may or may not be incurred under special circumstances.

A percentage lease is the most beneficial for property owners because it entitles them to a percentage of the profits of the tenant’s business. It means not only does the tenant pay rent for the usage of the leased premises but also shares a pre-determined percentage of the profits earned by the business entity.

What is the After Repair Value?

The After Repair Value (ARV) primarily forecasts the future price of any property after undergoing any kind of repair. After Repair Value is not the price of a new property, but the price of the property after re-furnishing or making some improvements to an existing property. It is used by a person who buys any sort of property, makes necessary improvements to increase its efficiency within a period of a year, and then sells it off.

Any property, after going through repair or any improvement, includes the price of the original property and the consequent cost of refurbishment. The value of the property and the cost of repair are used to predict the future price of the property post-repair you can refer to a sample commercial lease agreement. The investors should know the future price of the property after investing in repairing as it will be beneficial for them to evaluate whether they will be earning any profit or not after spending on the repair work.

Read also – Types of Commercial Leases

The calculation of ARV can be affected by the presence of various factors. However, the two main components that are necessary to find out the ARV are the property’s price at the time of purchase and the cost incurred/ investment in the repair work of the property.

ARV = (Purchase Price of Property) + (Cost incurred in Repair)

The following steps can help you calculate the ARV of any property

1. Determine the current value of the property.
2. Find out what will be the cost incurred in the repair work of the property.
3. Compare the price of the property with other properties in the existing market to ensure that sufficient profit is generated after selling it.

The aforementioned process is explained in detail below

3. How to Estimate the Current Value of the Property?

The current value of any property should be valued by a professional appraiser to ensure that the correct value is calculated. Services of certified websites can be employed to find out or compare the value of the property with other properties in the market. It is imperative to collect maximum information like flood certification on the property so that the best price or value of any property can be determined accurately.

4. How to Find the Estimated Repair Cost (ERC)?

After assessing the current value of the property, estimate the cost of repairing the property. This step is very important as it engages with the investment post initial purchase and determines the very fruitfulness of the investment. After Repair Value is basically the sum of the purchase price of the property and the cost incurred in repair and hence, one needs to figure out the cost of repair in order to get a good profit after selling the property.

Read also – GRM in Commercial Real Estate

5. How to Find out the Value of Comparable Properties?

The next step to be undertaken, after the repair of the property, is to compare the price of similar kinds of properties within the same locality. One needs to assess whether the value of the property is worth the price and if it is more or less equivalent to the comparable properties same as comparative marketing analysis. The ARV should be similar to the properties that are being compared. If the value of the property is less than the value of the comparable properties, then there are either chances of errors in the calculation, or it is a sign of wrong investment.

ARV is required in order to make a proper repair and regulate renovation expenses such that the property can attain a reasonable profit. ARV is extremely crucial for investors who are engaged in this kind of business as it gives them an indication on whether to invest or not in select properties. It is also used by the investors who rent their property after repair so that they can gain good rent as returns.

There are multiple approaches in the estimation or calculation of ARV, but the best way of finding ARV is by employing the 70% rule, a barometer used while purchasing distressed property in hope of later profits differentiates between modern home and contemporary home design. This method of calculation would be particularly helpful for flip-flop investors to estimate the future value of the property that is to be sold, and would, in turn, motivate them to invest more in such properties where they can gain sufficient returns.

The 70% ARV rule is used to find out the maximum bid price of any property. The rule bids the 70% price of the expected selling price post deduction of the repair cost, hence ensuring that there will be returns of around 30% for the investors.

Best Bid Price = (ARV x 70%) – ERC; where ARV is the After Repair Value and ERC is the Estimated Repair Cost

The best way to estimate the future value of any property is by using ARV. The data collected and information gathered need to be accurate and genuine to ensure the calculation of the correct value. If the future properties’ value can be accurately estimated, it will enable the investors to invest accordingly in any property.

Read also – How to Calculate Commercial Rent?