8 Steps to Creating Sound Financial Projections for a Small-Bay Industrial Acquisition

 

8 Steps to Creating Sound Financial Projections for a Small-Bay Industrial Acquisition

Investing in small-bay industrial properties demands precise and disciplined financial planning. Well-structured financial projections are more than just numbers — they’re the roadmap to determining whether an acquisition will truly deliver the returns you expect. Below are eight key steps to help you build clear, accurate, and actionable projections for your investment:

1. Analyze the Current Rent Roll

Start with a deep dive into the existing rent roll. Identify tenant mix, lease terms, rental rates, and occupancy levels. This provides a baseline for current income streams and a starting point for forecasting future revenue.

2. Assess Unit Sizes and Square Footage

Break down the property by unit size and total square footage. This analysis reveals which units contribute most to income and highlights opportunities to optimize space or reconfigure for higher returns.

3. Build Month-by-Month Projections

Map out detailed monthly projections for at least the first 12 months after acquisition. This level of granularity helps anticipate seasonal trends, lease expirations, and potential vacancy gaps, allowing you to manage cash flow proactively.

4. Prepare Year-Over-Year Summaries

Extend your projections over a multi-year horizon to track performance trends. These summaries help evaluate the impact of operational changes, rent escalations, or capital improvements on long-term profitability.

5. Break Down Loan and Closing Costs

Document financing terms in detail — loan amounts, interest rates, amortization schedules, and all closing costs. Clarity here ensures your net income and ROI calculations are accurate from the start.

6. Estimate Operating Expenses

Forecast all operating costs, including maintenance, utilities, management fees, property taxes, and insurance. Accurate expense modeling ensures a realistic view of the property’s net operating income (NOI).

7. Calculate Net Operating Income (NOI)

Deduct projected expenses from gross income to determine NOI — the cornerstone metric used by investors and lenders to gauge property performance and value.

8. Conduct Sensitivity Analysis

Test your assumptions by adjusting key variables such as rent rates, occupancy levels, and expenses. This stress-testing process reveals potential risks and gives you strategies to protect returns under varying market conditions.

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Expert Insight:

“The difference between a good deal and a great deal is almost always found in the numbers. Strong financial projections don’t just tell you if an acquisition works — they show you exactly how to make it work better. Our team is always available to help evaluate a site”

— Cody Payne, Small-Bay Industrial Expert & Author of Flex Space Domination

 

By following these eight steps, you’ll create a projection model that doesn’t just validate your acquisition but helps you navigate it toward maximum performance and profitability.