BuildingBits || BB Rating

BB Rating

THE BB RATING MAKES INVESTING SMART EASY

Trying to compare a Starbucks in a smaller city with an office building in the heart of downtown is extremely difficult for most people, which is why we created the BB Rating system!

With over 80+ years of combined Real Estate Experience, our experts have developed a unique algorithm for analyzing key aspects of a specific property and delivering them to you for every offering on the platform. 

Too often people focus on a single aspect of a property without any thought to the bigger picture. There is more to a real estate investment than just the rate of return, tenants or location. By only looking at just one or two data points you might miss the bigger picture and inadvertently miss out on an amazing opportunity.

We’ve developed a proprietary commercial real estate rating system to help you select the buildings that best match your overall investment objectives. 

We crunch data on six key property metrics including:

  • Cap Rate – which is a measure of the financial performance of a real estate asset. 
  • Location and local market dynamics
  • Tenant Quality
  • Lease Term
  • Building Class and quality
  • Useful Life (functional use of the building)

The BB Rating creates a "weighted average" based on the building specific data points that professional Real Estate Experts assess most often when making commercial investments. 

For first time individual investors, we will provide all the data for you to have at your fingertips in order to allow you to compare investment options apples-to-apples and to find the right fit for you. 

THE BB SCALE

The BB Rating is on a 1 - 5 scale to the 10th decimal (i.e 1.5, 3.5).  Keep in mind a low BB Rating doesn't mean you shouldn't invest! It means you should see which aspects of the property are bringing down the average. They may be things you personally don't feel are important to your investment goals.  

Moreover, given the unique aspect of our scale, a Building with a BB Rating of “5” can’t really exist in reality since that would mean that it has a very high yield, which is typically only associated with highly risky, poor-quality properties and also has virtually zero tenancy risk and is in a highly sought-after location, which would typically mean that it’s very expensive and hence would have a very low yield, rather than a high yield.  So “5” is simply unattainable based on our scale and no properties will ever have it.  Therefore, if 5 is a perfect score, which is impossible, like an 850 credit score, then a 3-4 Rating may be the ideal that an investor would want to go after, meaning this particular property offers an above market, risk-adjusted return.  In other words, it would have a relatively high yield with a pretty low level of risk.  

So the rating is really just a measure of the risk vs. return profile of the asset.  In other words, a score of 5 means that the return is basically disproportionately high to the low level of risk.  A score of 1 would mean that the return is way too low for the highly risky asset.  A score of 3 would mean that the risk/return trade-off is fair.  We want to go after buildings and want our customers to go after buildings that are more favorable than the average, that have a higher rate of return than what is probably commensurate with that level of risk.  In other words, the BB Rating is a measure of value, of how good the deal is.  Above a three means that it’s a good deal.  A 4 is really a way above average deal.  A 5 is the kind of deal that is simply too good to be true and hence won’t exist in reality.  A 2 is a slightly below average opportunity.  And a 1 is something that has an unjustifiably high level of risk, given the relatively low return.  

THE BB ICON

The BB Rating "Bits Icon" gives you a quick visual as to overall average; more colored-in boxes indicates a higher rating.