Held in September, Paramount Rocks the Night included three nights of music, thrill rides, great food, and loads of fun. The event was organized by the Paramount Chamber of Commerce and supported by sponsors including; ACE Clearwater, Northgate Gonzalez Market, and Para Latino Medical Center.
The chamber plans to make Paramount Rocks the Night an annual event to bring a variety of music and talent to the Paramount community. This year had something for everyone; Friday, September 18, was a combination of Blues and Rockabilly, featured artists included Henry Carvajal, San
Pedro Slim, Side Effect, and The Rumble King. Saturday, September 19, a variety of Jazz artist performed including Spare Button, The Jazz Angels, and The Pat Morvan Jazz Trio. Latin music wrapped up the weekend with performances on Sunday, September 20, by Mariachi Los Pasajeros, Grupo Oriental 4, Annabelle Orozco, the 454’s, and Paramount Dance Company & Spotlight Dance Studio.
Festival goers could sit back and enjoy music, visit community booths, or ride the ferris wheel. There were also lots of food choices; Northgate Gonzalez Market served tacos and ceviche, while Gus’s Deli,
BBQ & Grill offered BBQ tri-tip and ribs. Those with a sweet tooth could be found at the Kali Churros booth or picking out their favorite funnel cake from D & J Delicious Mexican Food.
Paramount Chamber President, Leonard Crespo had this to say, “Being a grandfather my favorite part was seeing families out together and the children having so much fun.”
Peggy Lemons Executive Director for the Paramount Chamber said, “Wow, this event was a lot of work. I am so grateful to all the major sponsors who donated the money to make it possible.
Also I can’t say enough about the Paramount Entertainment Center who not only donated the property for the event but supplied the security and manpower to make it a success. We also received donations from Molina Health Care, and RMI International. This event required a lot of planning and a lot of volunteers, I’m so grateful to everyone who donated their time and money. I really need to thank the committee who spent months planning this event and getting all of the artist to perform at the festival; thank you Mark Guillen, Brenda Olmos, Biviano Favela, and Steve Guillen.”
Online Water Bill Payment Now Available
You can now pay your City of Paramount water bill online with a credit or debit card.
Visit www.paramountcity.com to find a story with a link to where you can set up the online payment option. (You can also find this link on the “Services” page of the website under “Utilities” and “Water”.)
You can then pay a bill with a card, check your account information, and view both transaction and consumption histories. You can also set up an “auto-pay” feature using your credit card or debit card.
The credit or debit card option is only available online, and cannot be utilized if paying by mail or at the City Hall customer service counter.
All regular terms and conditions of pay-
ment apply. For more information, please call (562) 220-2010.
Water Conservation Figures Continue to Beat State-Imposed Cuts
Here’s the latest on the City’s efforts to cut water use by 12%, as measured against 2013 figures. If this reduction is not met, the State can start imposing fines of up to $10,000 a day.
The residents and businesses of Paramount have been doing well, besting the 12% each month since the requirement was instituted. The City’s water use for June was down a dramatic 29% over the same period in 2013. In July, water use was down by 19%.
The latest figure is for August, and it reflects a 16% decrease in usage versus the same month in 2013.
While everyone is doing their part – especially impressive during the recent heat waves – the savings percentages have been trending downward. The City encourages all water users to redouble their efforts so we don’t dip below the 12% mark.
Sprinkler Watering Days Change in November
As part of the City’s moves to encourage water conservation, outdoor watering with sprinklers is allowed on Mondays and Thursdays through the rest of October. Then, as of November, that changes to Mondays
only till the end of next March. (This doesn’t apply to watering with a hand-held hose with a shut-off device as long as there is no run-off, or to very-low-flow drip irrigation systems.)
Other conservation measures are as follows:
Water run-off from lawns and landscaping is prohibited.
Hosing down paved surfaces is not permitted.
Washing a car at a residence is not allowed.
No planting of new turf grass. Violations can result in fines up to $500. Measures do not apply to “reclaimed” water, which City parks and landscaped medians use. All decorative water fountains operated by the City use re-circulating water.
For more information, please call the City Public Works Department at (562) 220-2020.
Get Your Tickets For The Seniors Thanksgiving Dinner
Here’s an early reminder to mark Thursday, November 19th on your calendar for the annual Seniors Thanksgiving Dinner. It takes place from 10 a.m. to 1 p.m. in the Paramount Park gym.
This is a great event that always provides a day of fun and friendship, a chance for folks to visit, catch up, and share a nice meal.
In order to attend you will need to purchase a ticket. Tickets will be available at the Paramount Park Community Center for Paramount residents starting October 19th at a cost of $2 each and for non-residents beginning November 2nd at a cost of $5 each.
For more information, please call (562) 220-2090.
Healthy Behaviors
STAR (Success Through Academics & Recreation) is a free afterschool program, a collaboration between the City (which provides staff) and the Paramount Unified School District (which provides the space).
STAR offers an academically rich
environment through homework help and literacy enhancement. The program also promotes healthy living with physical activities. It operates every day of the week in each PUSD K-8 school and is paid for with State of California After School Education & Safety (ASES) grant funds.
The STAR program at Jefferson Elementary recently gained an impressive honor. It became one of only 31 programs statewide to be designated a Healthy Behaviors Initiative (HBI) site.
HBI sites are models for hundreds of other schools on how to effectively teach healthy eating and exercise habits. They provide free coaching, resources, and tools for these other schools to better incorporate nutritional education into their programming.
Congratulations to our staff at Jefferson for being recognized in this way and for helping other schools – and schoolchildren – throughout the region.
Nutrition Programs for Seniors
The City offers appetizing and wellbalanced meals for seniors ages 60 and over Monday through Friday at noon at the Paramount Park Community Center. Transportation to and from the Center is available. Residents may register for the meals Monday to Friday (non-residents Thursday and Friday) of the week prior. Suggested donation is $2.00. For information call (562) 220-2090.
For homebound seniors, meals can be delivered right to their residence. An application is needed for this service. For more information, call Human Services Association (HSA) at (562) 806-5400, x-162 and ask for Elizabeth Ruiz. There is a suggested donation of $2.50 per meal, but no one is refused because of an inability to pay.
Paramount Posts
You can follow the City on both Instagram and Twitter to learn about services and events, fun facts and important announcements, news and more. Simply go to either site and search for paramount_posts.
Mayor, Tom Hansen
Graffiti Tracker Helps With Felony Charge Against Tagger
While Driving – Not Worth
There are plenty of facts, figures, and details about distracted driving, but the California Office of Traffic Safety wants you to know the plain and simple ones:
• 80 percent of vehicle crashes involve some sort of driver inattention.
• If something falls to the floor, pull over before trying to reach it.
Paramount’s crime analyst and a number of deputies who patrol the City noticed an upsurge in graffiti recently on the west side of town. In addition, a resident emailed their BEAT deputy about this issue on the Public Safety page of the City’s website. (www. paramountcity.com/beatmap.cfm.)
Project LEAD Sending Positive Message to Paramount Fifth Graders
On a Saturday evening, a “vandalism occurring now” call from the area came into the Sheriff’s Station. The responding deputy discovered an individual matching the description of the suspect who was spray-painting the window of a building. The suspect was taken into custody and was later identified as a gang member based in Bellflower.
• Up to 6,000 people nationwide are killed in crashes where driver distractions are involved.
• Talking on a cell phone or texting is the number one source of driver distractions.
The suspect admitted to committing numerous instances of graffiti. Using the Graffiti Tracker database, the crime analyst then researched all reported graffiti connected to the suspect and his gang – he was allegedly tied to more than 100 graffiti incidents. The case has been filed and the suspect is being charged with felony vandalism.
Paramount has its own dedicated District Attorney – Kelly Tatman – who works out of the Sheriff’s Station. Her duties include making sure that criminal investigations and prosecutions in town receive full attention and don’t fall through the cracks at the larger County D.A.’s Office.
Graffiti Reporting Hotline and Graffiti Reward Program
• Texting takes your eyes off the road for an average of five seconds, long enough to travel the length of a football field at 55 mph. Most crashes happen with less than three seconds reaction time.
Paramount, like most cities, has a graffiti hotline to receive reports of the vandalism in town and a reward program for individuals who come forward after witnessing the act.
• The act of talking on a cell phone, even hands free, can give you “inattention blindness,” where your brain isn’t seeing what’s right in front of you. You aren’t even aware that you are driving impaired. If you think you can handle both driving and talking on a cell phone or texting, you are kidding yourself and putting us all at risk.
The City stays on top of graffiti outbreaks, wiping them clean within 48 hours (and usually much quicker). On a routine basis, the Public Works Graffiti Removal Team examines parks, alleys, large walls, and other potential areas that would attract taggers, and removes all graffiti in public view.
Anyone in the community who sees graffiti can call the City’s Hotline at (562) 2202233 and report the location so the crew can go and clean it up.
your eyes or mind off the road or your hands off the steering wheel – especially texting and cell phone use, whether hands-free or hand held. Who’s doing it? Most of us. It has been estimated that, at any one time, more than 10 percent of drivers are using a mobile device.
on a cell phone is a major distraction to your wallet.
the law. It’s there for a reason. Also, do your best to eliminate distractions:
• Never text and drive.
• Turn off your phone when you get behind the wheel.
• Don’t text or call someone when you know they are likely to be driving.
• Make a pact with your family, spouse, and caregivers never to use the phone with kids in the car.
• No eating or drinking while driving.
• Don’t program your GPS, MP3 player, or other devices while driving.
• Pull over and stop to read maps.
• No grooming.
• No reading.
• No watching videos.
• Try not to get too involved with pas sengers.
Tatman has been visiting a class of 36 students at Jefferson School as part of Project LEAD. The program, which goes into the classroom once a week for 20 weeks during the school year, uses volunteers like Tatman from the D.A.’s Office to teach fifth-graders about the law and help them recognize the social and legal consequences of criminal behavior.
Sadly, too many young people first become acquainted with the justice system as delinquents. Project LEAD is designed to
The class from Jefferson recently went on a field trip to the Museum of Tolerance. (They tion, Project LEAD’s curriculum includes speakers connected to the criminal justice system and a mock trial involving either drug dents are assigned roles and argue a criminal case to a jury consisting of other students.
At the end of the program, the kids will participate in a graduation ceremony and receive a certificate of completion from the D.A.’s Office at a meeting of the Paramount
ber that if you’re going out of town for an extended period of time, you can schedule
Paramount residents can contact the Sheriff’s Station about having Volunteers on Patrol keep an eye on your home or property
Friday, May 16, 2014 - 10am to 12pm
Attend this presentation and learn how to use the power of event marketing to get potential and
Annual Microbiology Research Symposium Gets Students Excited about Science at El Camino College Compton Center
With jobs requiring technical/science skills expected to boom in the next decade, El Camino College Compton Center is helping students explore education and careers in the Science, Technology, Engineering and Mathematics (STEM) fields. Eighty percent of the fastest growing occupations in the United States depend upon mastery of mathematics and scientific knowledge and skills, and there are currently not enough qualified people to fill those jobs.
One way ECC Compton Center is getting students motivated about pursing degrees and careers in STEM-related fields is through an annual Microbiology Research Symposium each spring. The symposium was the brainchild of Biological Sciences Instructor Eyob Wallano who has already enlisted ECC Compton Center faculty who teach other science disciplines such as anatomy, astronomy, biology, chemistry, geology, geography, physiology, and physics to join the research symposium planned for 2016. The purpose of the symposium is to help students get oriented with scientific research at the undergraduate level. Students have the opportunity to conduct both handson evidenced research and literature-based research.
“The students’ research findings from the Microbiology Symposium provide a way to inform and educate the community about health, medical and environmental issues affecting us all,” said Wallano. “The research symposiums are designed to encourage more students to consider science majors, motivate them to continue to do more research, gain valuable experience, and secure jobs in STEM-related fields.”
This year, 16 ECC Compton Center students from two of Wallano’s microbiology classes conducted 10 different research
projects and then presented their findings at the symposium, which was attended by more than 300 students, faculty, friends and family members. The students conducted research that was relative and applicable to their own immediate environment. The students’ research presentations from the inaugural Microbiology Symposium are available for viewing on ECC Compton Center’s You Tube Channel at https://www. youtube.com/user/eccweb.
Some of the standout results include those from the “Antibacterial Effects of Hen Egg-White Enzyme” and “Is the Use of Microwave Dangerous?” research projects. In the first project, students found that Hen Egg-White (HEW) is a powerful enzyme called Lysozyme that is equally effective against bacteria growth as disinfectants, antiseptics and antibiotics. In the second project, the students’ research showed that microwaved water does not support plant germination or growth, which could lead to the correlation to and potential impacts of microwaved water or food on human health.
ECC Compton Center offers STEMrelated courses via three academic areas: Natural Sciences, Mathematical Sciences, and Career and Technical Education. STEM-related skills are not just a source of jobs, they are a source of jobs that pay very well. According to a report from the Georgetown University Center on Education and the Workforce, 65 percent of people with bachelor’s degrees in STEM fields earn more than people with master’s degrees in non-STEM occupations.
Interested students are encouraged to discover all the course offerings available at ECC Compton Center; application and registration information are available at www.compton.edu.
paramount Chamber of Commerce
Invites you to attend a Open House / Ribbon Cutting Latigo Boxing Club
Students conducting evidence-based research in a microbiology class at El Camino College Compton Center in preparation for the college’s annual “Microbiology Research Symposium.”
Henry Carvajal and San Pedro Slim.
Side Effect.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
The Jazz Angels.
Event sponsor - Northgate Gonzalez Market.
D & J Delicious Mexican Food
Event sponsor - Para latino Medical Center.
Jeselle Salazar.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Paramount Dance Company & Spotlight Dance Studio.
Free Practice for SAT Available at KhanAcademy.org
The Official SAT® Practice for the redesigned SAT can be found on KhanAcademy.org, making free, personalized online practice available for all students. The Official SAT Practice includes sample questions, quizzes, video lessons, and personalized recommendations.
The interactive practice tools are designed to help level the playing field for students who are interested in taking the SAT and preparing for college-level courses. Unlike traditional high-priced test prep that focuses on strategies for taking the test and quick cramming, Official SAT Practice supports and reinforces what students are learning in classrooms by helping them focus on the knowledge and skills most essential for college readiness.
Official SAT Practice is available for free and is designed to easily be used by students, families, schools, community organizations, and afterschool programs –anytime, anywhere.
Students can access Official SAT Practice on KhanAcademy.org and find:
• Detailed information about the redesigned SAT, including thousands of practice questions, explanations of each section of the test, and guidance on interpreting test scores.
• Interactive questions, video lessons, and reference articles to help students practice and review the skills that research shows are essential for college readiness and that are tested on the SAT in both Math and Evidence-Based Reading and Writing.
• Short diagnostic quizzes in both Math and Evidence-Based Reading and Writing to help students identify the skills they should focus on.
• Personalized practice recommendations, directly tied to specific skills on the test, to make the biggest impact on student performance and overall college readiness.
• Four official full-length practice tests, so students can see detailed results of their work and Khan Academy can direct them to the most appropriate materials.
• Instant feedback on their answers so that students are always learning and seeing their progress.
• Study tips and suggestions for test day.
(Provided by The College Board)
Free Adult Computer and Parenting Classes
Amongst the many learning opportunities offered by the City and PEP at the Paramount Petroleum Community Learning Center at Spane Park are some options aimed at adults. For instance, Cerritos College holds a basic computer training class for adults who have no experience with computers. The free classes are on Saturdays from 9:30 a.m. to 1:30 p.m. You must register to take part. Contact the Center at (562) 220-2250 for more details.
A new parenting class will be starting Friday, October 9th from 9:00 a.m. to 11:00 a.m. This class provides proven strategies for parents dealing with children who have behavioral problems, truancy, failing grades, drug/alcohol use, and gang involvement. Contact the Center at (562) 220-2250 for more information.
i T y c ou N cil m ee T i N g
Trio Honored For Helping Neighbors
Paramount resident kevin Carrillo and visitors Javier Aldaz and Emmanuel Gutierrez were commended at the Paramount City Council meeting on Sept. 1 for their actions in helping to contain a garage fire and getting the residents of the adjacent house and their pets to safety. From left: Councilmember Diane Martinez, Councilmember Gene Daniels, Aldaz, Carrillo, Mayor Tom Hansen, Gutierrez, Councilmember Peggy lemons, and Vice Mayor Daryl Hofmeyer.
Soccer Champs Recognized
The uiFC Panthers Boys under 15 soccer team was recognized at the Sept. 1st Paramount City Council meeting for a remarkable season that saw them winning the state, Western regional, and national championships for their division in the united States youth Soccer Association. The team features a number of Paramount residents, is coached by Paramount resident Francisco Arnaud, and practice at roosevelt School.
Positively
Paramount Civic Center
Paramount Places!
Paramount’s Civic Center Plaza is a beautiful botanical oasis, a one-acre garden-like public space with walking paths, benches and dynamic fountains. It links City Hall, Suburban Medical Center and the County Library as a cohesive whole while opening up a larger downtown corridor tying the Pond and the Iceland skating rink together. A special feature is a small park area around the historic “Hay Tree,” which dates back to Paramount’s days as the leading dairy producer in the state. City Hall, 16400 Colorado Ave. Bianchi Paramount Theatres
Eleven state-of-the-art luxury theatres. Featuring stadium seating, digital sound system. Two Screen Drive-In 7770 Rosecrans Avenue at Paramount Blvd.
Paramount Iceland
Home of the world famous Zamboni Ice Machine. Featuring one of the largest indoor ice skating arenas in existence. An historical landmark, with a rich tradition as an Olympic training facility 8041 Jackson St. Paramount Pond
A decorative, restful public plaza, featuring a bronze sculpture garden with nearby coffee house and eateries Corner of Paramount Blvd. & Jackson St.
Paramount’s Outdoor Art Museum
9 By 9 By 9 .................................................................................................Spane Park, 14400 Gundry Ave. Boxes ...............................................................................................Corner of Downey Ave. & Jefferson St. Conversation ...............................................................................................City
Hot Diggity Dog!” Keep Your Pet Safe From the Heat
SEAACA (Southeast Area Animal Control Authority; www.seaaca.org) is providing pet owners and animal lovers with useful tips about surviving the summer’s high temperatures. In the summer heat many cats, dogs and other pets can suffer from a wide variety of ailments, including dehydration, exhaustion, and heat stroke. With a few preventive measures and safety precautions, pet owners can protect their beloved animals and help them enjoy these fun months.
Here are some important tips:
Drink Up. Ensure your pets always have cool, clean water that is easily accessible. Drinking water is the best way for pets to avoid dehydration. Plus, remember that water warms up fast, so replace water dishes frequently to keep them cool and clean.
Keep It Cool. Make sure your air conditioning is on or that your windows and doors are open. Cross-ventilate to keep air moving through your home. You can also cover windows to block the hot sunlight during the day.
Not In the Car. Never, under any circumstances, leave your pet in a car. Within just a few minutes of being trapped in a hot car, your pet’s temperature can rise to dangerous and lethal levels. And remember, rolling down the windows or parking in the shade while your animal is in a car is not acceptable.
Take It Easy. Too much exercise, particularly in the middle of the day, can exhaust your pet during the hot summer months (especially for older pets, short-nosed dogs, and pets with thick coats). Try to take walks or exercise your pet in the morning or evening, when the temperature is cooler. Also, avoid walking on hot concrete or asphalt and instead use soft grass areas if possible.
Don’t Get Buggy. Fleas and ticks can be extra problematic during the summer. Make sure to use flea and tick treatments recommended by your veterinarian.
Apply the Lotion. Some pets can get sunburned, especially if they have light-skinned and exposed flesh on their noses, ears, and other body parts. Talk to your veterinarian and apply appropriate sunscreen to your pet’s vulnerable areas.
Watch It. Pets can’t tell you they’re stressed by the heat, but you can notice multiple telltale signs. These include heavy panting, constant thirst, dizziness, lethargy, unusual clumsiness, fast heartbeats, glazed or unresponsive eyes, vomiting, excessive salivation, and deep red or purple tongue color. If your pet exhibits any of these characteristics or behaviors, contact your veterinarian or animal hospital immediately.
Take Action. If your pet is succumbing to the heat, here are actions you can take before seeking professional medical assistance:
Move your pet into a shaded or cooler area.
Place your pet in cool (not ice cold) water.
Apply cold towels or ice packs to your pet’s head, neck and chest.
Allow your pet easy access to cool water.
10 Tips to Cut Costs in Your Business
As a small business owner, you should always be on the lookout for ways to improve cash flow. One of the ways you can improve cash flow is by cutting costs. Here are some of the most effective ways to reduce expenses without compromising quality.
1. Go over your expenses. First step: Assess everything—from your Internet and phone services to your insurance policy and office supplies. Is there anything you can eliminate? Perhaps you can give up some magazine subscriptions and get the same information online; cut back on your office cleaning service; or have the utility company audit your usage. Cutting a bit here and there can quickly add up to real savings.
2. Barter your products or services with another business. Bartering, or trading, can conserve your cash for other purposes. For example, if you own an IT company, you could barter with a local restaurant to cater your holiday party, giving them the equivalent value in IT services. You can either set up your own barter terms with the other company, or join a barter exchange (go online to find them) that offers more formal arrangements. An added benefit of using barter is that it can introduce you to new contacts—and lead to more (paying) business.
3. Let your staff work at home. If your business is open 5 days a week, having your team work from home just one day each week shaves 20 percent off your monthly utility costs. You can use e-mail, conference calls, instant messaging and other technology tools to help everyone work together. In addition to saving money, telecommuting is a great “perk” for your employees.
4. Lease instead of buying. Now is a great time to get deals on business equipment. If you’re planning to upgrade, consider leasing instead of purchasing. You’ll conserve your cash, get the latest bells and whistles, and have the option of buying the equipment when the lease is up—or trading up to a newer model. Make sure you clarify all the terms of the lease before you seal the deal.
5. Join forces. Partner up with other small businesses in your area to create a buying co-op. If you get enough businesses to participate, you can most likely get better deals from suppliers than you could on your own. As a bonus, a co-op helps you forge relationships with other entrepreneurs.
6. Rethink business travel. Business travel costs are increasing, but there’s
some good news: Thanks to technology, you may not need to travel. Whether it’s virtual trade shows or videoconferencing, there’s a way to do just about everything without leaving your office. Before you travel to meet with prospects or clients, look into all your other alternatives. You’ll save time as well as money, boosting your productivity.
7. Go paperless whenever possible. Email documents instead of mailing them. E-billing is a great way to save on printing and postage costs—plus, since your invoices get to clients faster, you get paid faster. Go online to search for companies that can set you up for e-billing. Use the collaborative editing features in your word processing program to share and edit documents among groups without having to print. Finally, investigate online storage solutions, which enable storing infinite amounts of information on the Internet—not in your office. In addition to saving money, you’ll save trees.
8. Ask for staff suggestions. You have to cut your expenses, but how to do it without laying anyone off? Ask your employees for their ideas. Your staff is on the front lines, so they may know better than you what processes could be streamlined, what projects aren’t profitable or what equipment is less than essential. Brainstorm ideas with your team, and you could easily generate enough moneysaving concepts to save a salary. Plus, showing your employees you care enough to ask their opinions pays off in loyalty.
9. Consider alternatives to employees. You need to hire more help, but you can’t afford a full salary and benefits. How about using part-timers or interns? Depending on the labor laws in your state, interns may be able to work unpaid in return for school credits. Of course, you’ll pay your part-timers, but you’ll avoid the added expense of benefits. (Always ask your attorney to make sure you’re following your state’s labor regulations.) Best of all, an intern or part-timer is a great way to “test” an employee you may later want to hire full time.
10. Pay attention to your profit margins. Do you know which of your company’s products and services are your most and least profitable? You should. However, as your business grows, it’s easy to slip into the habit of pushing the products that are easiest to sell—not necessarily the ones with the highest margins. Focus on selling your most profitable offerings, and you will not only bring in more money, but also re-energize your staff.
Ask The Expert
Cap Rates in Commercial Real Estate
By: Matt Wagner – GM Properties (562) 696-0200
What is a cap rate?
The capitalization rate, mostly called the “cap rate”, is a fundamental concept most commonly used in the Commercial Real Estate world. The cap rate is the ratio of the Net Operating Income (NOI) to property values.
NOI is a calculation used to analyze real estate investments that generate income. It is all the income that the asset generates minus the necessary operating expenses to generate that income.
For an easy example, let’s say a property sells for $1,000,000 and generates an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%. Cap rates are a simple tool that investors use to show the percent return an investor would receive on an all cash purchase.
Loan payments and interest are not factored into the cap rate equation; therefore they are limited in how much they can be used for investment purposes. They are best used when comparing investment properties in similar locations.
For more complex cash flows, utilizing a full discounted cash flow analysis is by far the better way to analyze the investment. Some factors that are not taken into account for cap rates are: age of property, creditworthiness of tenant, length of leases and the underlying economic fundamentals of the region including population growth, employment growth and inventory of comparable space on the market at that point in time.
Another common mistake is not properly considering the expected holding periods and exit strategies for the real estate. So you can see by the lack of depth that the cap rate is not a tell all tool that commercial real estate agents and investors use, rather it is quick tool that is best used when comparing investments.
There are many layers used in the valuation process of commercial real estate investments and cap rates are generally one of the first tools utilized in the process. This valuation process usually will move into a full discounted cash flow analysis to further and better evaluate an income property.
Because a discounted cash flow analysis is much more in depth and time consuming, cap rates are usually used at the beginning of the process to help sort out the options available.
If I have confused you in this explanation process, no problem, simply contact your local commercial real estate agent to discuss the current cap rates that are specific to the local market you are focusing on. And as always, good luck in your investing!
