Investment has its own language. In this class I discuss the specific things I look for to determine a great market to invest in AND how to find great investment properties. I teach the principles to both help you better serve your investor clients AND to become a better investor yourself. I also provide a free investment analysis tool to help you find great deals fast.
Is a measure of your annual Cash Outflow as a percentage of the loan amount. It is calculated as Annual Loan Payment/Loan Amount
Cap Rate – Loan Constant
Cash inflow – Cash Outflow
Calculated by Net Operating Income divided by Cash Required to Close. It is important to compare your Unleveraged Return to Leverage return to determine if you have Positive Leverage (ideal), Neutral Leverage or Negative Leverage.
Mortgage Insurance if required
This is similar to Cash on Cash Return but also includes appreciation, and mortgage principal paydown to illustrate a more complete return.
An annual measure of a real estate investor’s earnings on a property compared to the amount the investor initially spent to purchase it and make it operational.
Your cash-on-cash return is your annual cash flow (pre-tax) divided by your total cash investment.
Calculated by dividing a property’s net operating income by its asset value, the cap rate is an assessment of the yield of a property over one year. For example, a property worth $14 million generating $600,000 of NOI would have a cap rate of 4.3%. That means that you can expect a roughly 4.3% annual operating cash flow given the price paid for the property.
is a screening metric used by investors to compare rental property opportunities in a given market against each other. The GRM functions as the ratio of the property’s market value over its annual gross rental income.
is a metric that looks at a property’s income compared to its debt obligations. Properties with a DCR of more than 1 are considered profitable, while those with a DSCR of less than one are losing money.
Any other costs you will be covering for the property. i.e. if you are going to pay for the pool maintenance then the Gross rent would be higher but you would include that cost here.
What do you anticipate it will cost per year to maintain the home from a Landlords perspective? Older homes will be higher than newer homes.
What do you anticipate the property appreciating annually?
Include all Buyer costs at closing AND the cost you will put into the property after closing to get it ready to rent.
