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Answers from Murphy D. Cheatham IITwenty years across development, city housing, brokerage and private client advisory, distilled into straight answers. 33 questions on commercial real estate, financing, generational wealth, investing abroad, and building a career and life that last.
Last updated · Educational, not investment, tax or legal advice.
The language of commercial property: what it is, how it is valued, and how leases work.
Commercial real estate is property used to run a business or earn income: office, retail, industrial and logistics, multifamily apartment buildings, hotels, land, and specialty assets such as medical offices and data centers. Unlike a home, it is valued mainly on the income it produces, which is why rents, leases and operating costs drive every decision.
Appraisers use three approaches. The income approach divides net operating income by a market cap rate, and it dominates for income property. The sales comparison approach looks at recent trades of similar buildings. The cost approach estimates what it would take to rebuild, less depreciation. A sound valuation checks all three against each other.
A capitalization rate is a property's net operating income divided by its price. A building earning $500,000 a year in NOI that sells for $8 million trades at a 6.25 percent cap rate. Higher cap rates signal more perceived risk and a lower price per dollar of income. Lower cap rates signal safer income and a higher price. Cap rates move with interest rates and market demand.
Net operating income is all the income a property collects, such as rent, parking and fees, minus the costs to operate it, such as taxes, insurance, utilities, repairs and management. NOI is measured before loan payments, income taxes and depreciation. It is the single most important number in commercial real estate because value, lending and returns all start from it.
Building class is a shorthand for quality relative to the local market. Class A buildings are the newest or best located, with top tenants and the highest rents. Class B buildings are older but well kept. Class C buildings need work and carry more risk. The labels are relative, so a Class A building in one city may rate lower in another.
In a gross lease the tenant pays one rent and the landlord covers operating costs. In a modified gross lease the costs are split. In a triple net (NNN) lease the tenant pays rent plus property taxes, insurance and maintenance. Net leases give the owner more predictable income, which is why single-tenant net lease property is popular with private investors.
No property type wins in every cycle. Resilience comes from the drivers underneath: tenant credit, lease length, location, and real demand for the space. In recent years industrial and multifamily benefited from structural demand, while office faced pressure from remote and hybrid work. The better question is how secure a specific building's income is, not which category is in fashion.
How deals are paid for, and how to choose the right capital for your situation.
The capital stack is the layers of money that fund a property, ranked by who gets paid first. Senior debt sits at the bottom with the lowest risk and lowest return. Mezzanine debt and preferred equity sit in the middle. Common equity sits on top, absorbing losses first but keeping the upside. Where you sit in the stack sets both your risk and your reward.
Debt carries a fixed cost and a repayment obligation, but you keep full ownership and leverage can amplify returns. Equity has no required payments, but you share the upside and often control. The right mix depends on how certain the cash flow is, how much control matters to you, and how much risk your family can carry if the market turns. Sourcing and structuring both is core to Murphy's private client work.
DSCR is net operating income divided by annual loan payments. A ratio of 1.25 means the property earns 25 percent more than it needs to pay the mortgage. Lenders set a minimum DSCR, commonly in the range of about 1.20 to 1.35 depending on the lender and property type, so this one number often decides how much you can borrow.
Loan-to-value is the loan amount divided by the property's appraised value. Commercial lenders usually lend at lower LTVs than home lenders, which means larger down payments. The allowed LTV varies by lender, property type and market conditions, and in practice the lower of the LTV limit and the DSCR limit sets the loan size.
With a recourse loan the lender can pursue the borrower's other assets if the property does not cover the debt. With a non-recourse loan the lender is generally limited to the property itself, subject to carve-outs for things like fraud or misuse of funds. Non-recourse terms protect the rest of a family's balance sheet, which matters for long-term wealth.
A 1031 exchange, named for Section 1031 of the US tax code, lets an investor defer capital gains tax by selling investment real estate and reinvesting in like-kind property. The replacement property must be identified within 45 days and acquired within 180 days, and a qualified intermediary must hold the proceeds. Rules are strict, so work with a tax adviser before you sell.
How private investors get in, what to check before buying, and how to run a portfolio for the long term.
There are five common routes: buying a property directly, joining a partnership or syndication, buying shares of a publicly traded REIT, investing in a private fund, or, for 1031 buyers, a Delaware Statutory Trust. Each trades off control, liquidity, fees and minimum investment. Direct ownership gives the most control and the most work. Public REITs give the most liquidity and the least control.
Real due diligence covers the rent roll and every lease, the trailing twelve months of income and expenses, tenant credit, a physical inspection, a Phase I environmental report, title and survey, zoning and permits, and a read on the local market. The goal is to confirm the income is real and the risks are known before money is committed. Measure twice, cut once.
Portfolio optimization means reviewing every asset against your goals and acting on what you find: refinancing debt when terms improve, selling assets that no longer earn their place, reinvesting in properties with upside, and balancing exposure across property types, locations, tenants and lease expirations. For families, it also means aligning the portfolio with income needs, taxes and the next generation.
Management is where value is made or lost day to day. Good managers keep tenants, control expenses, collect rent on time and maintain the building, which protects net operating income. Since value is NOI divided by a cap rate, every dollar of NOI saved or earned adds many dollars of value. Poor management quietly erodes a good asset.
Higher interest rates raise borrowing costs and tend to push cap rates up, which lowers values for the same income. Lower rates usually do the opposite. The link is not one to one: rent growth, supply and investor demand also move prices. Owners with maturing loans feel rate changes most, which is why debt timing is part of every strategy.
Building and keeping wealth across generations, for families, founders and professional athletes.
A family office is a private firm that manages a wealthy family's investments, taxes, estate planning, philanthropy and often real estate. A single-family office serves one family. A multi-family office serves several and shares the cost. Murphy explored how one multi-family office serves professional athletes in his podcast episode with RISE Family Office.
Real estate combines several wealth builders in one asset: income from rent, appreciation over time, leverage that lets a family control more property than its cash alone could buy, and tax treatment such as depreciation. Under current US law, heirs may also receive a stepped-up cost basis. It is tangible, it can be passed down, and it can be managed by the next generation.
Families commonly hold property in LLCs, family limited partnerships or trusts. These structures can limit liability, simplify transfers and keep ownership in the family. Structure is only half the work. The other half is governance and education: clear decision rules, and preparing the next generation to own, not just inherit. An estate attorney and tax adviser should design the structure.
High earners often face a short earning window, heavy attention from people with deals, and pressure to spend. The basics protect them: keep liquidity, avoid concentrating in one deal or one partner, verify every adviser is independent, and treat real estate as a long-term income engine rather than a quick win. Murphy explored these themes with NFL veteran Jaylon Smith and RISE Family Office.
Local ownership grows when residents and local investors own the buildings around them, not just rent in them. That takes capital, technical skill and access to the industry. Murphy has worked on all three: as Chief of Housing and Business Development for the City of Shreveport, and by connecting Arizona State University and Grambling State University in a real estate education partnership.
What changes when your property, your income or your retirement crosses a border. Covered in depth through Tierra Firme.
Yes. Foreigners can generally own property in Colombia on the same terms as citizens. Purchases are closed before a notary and recorded in the public registry, and foreign investment money should be brought in through the formal exchange market so it is registered with the central bank, which protects your ability to send proceeds home later. Use an independent local attorney for title review.
Almost everything around the property changes: the title system, how closings work, taxes in two countries, financing (often cash only for foreigners), currency risk, property management from a distance, and how easily you can sell later. The asset analysis is the same, NOI, condition, location, but the deal around it needs local counsel and a plan for each of these points.
If your property earns and sells in pesos but you measure wealth in dollars, the exchange rate becomes part of your return. A strong local property return can shrink if the local currency weakens, and grow if it strengthens. Investors handle this by matching currencies where possible, keeping reserves, and watching the macro picture, which is the research layer Tierra Firme provides.
The lessons behind long careers: relationships, discipline and decisions. The core of The Murphy Cheatham Podcast.
There are many doors: brokerage, development, finance and lending, asset and property management, consulting and the public sector. Murphy started as an accountant for a home builder, then moved through sales, planning, community development, consulting and brokerage. The lessons from that path: learn the technical side, find mentors, and build relationships deliberately. A graduate degree such as an MRED can speed the shift.
It is the philosophy behind The Murphy Cheatham Podcast. In real estate and in life, the cost of a mistake is far larger after you commit than before. So do the diligence, test your assumptions and get the facts straight first, then act with confidence. It is a rule for buying property, choosing partners and making career moves.
Stop asking for business and start offering value. People work with those who help them before any deal is on the table. That means consistency over time, long-term thinking in B2B relationships, and learning who actually makes decisions beyond titles on a business card. Murphy covers each of these on the podcast.
Technical skill gets you in the door. Consistency, coachability and relationships move you to the top. Murphy has coached commercial real estate producers at CBRE to establish a foothold and grow toward market leadership. The pattern he describes: balance aggressiveness with coachability, learn from large organizations, and execute relentlessly.
Treat a career change like a deal: know what you bring, study the new field, and build relationships before you need them. Murphy's own path ran from accounting to development to the public sector to brokerage to private client leadership. He explored the subject in depth with guest Jade Parrish Marks on the podcast.
Long careers are built on decisions that hold up for decades: owning assets that pay you, protecting your health and family time, and choosing work and partners aligned with your values. The podcast's conversations with leaders, athletes and founders keep returning to one theme: success takes more than effort. It takes clarity about what you are building and why.
Who owns real estate shapes who builds wealth and who shapes neighborhoods. Murphy has said he did not have a mentor from his background when he entered the industry, and he has worked to change that through coaching producers at CBRE and through the ASU and Grambling State real estate partnership, with the goal of helping communities own their neighborhoods.
Send it in. Strong questions become new answers on this page and topics on the podcast.