The art of real estate investing
37
Greg Rand, CEO
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Begin to invest in your future with this residential investment course.I can help you find the properties that make the most sense. Call to join my investor tour of homes.
Transcript of The art of real estate investing
Greg Rand, CEO
$160,000
$180,000
$200,000
$220,000
$240,000
$260,000
$280,000
$300,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Recession
Boom Begins
Stocks and RE Rise
Overheated
Stock Mkt Crash
Bank Bailout Real Estate Correction
Single Family Home Prices
Single Family Home Prices
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991
Recession
Boom Begins
Stocks and RE Rise
Overheated
Stock Mkt Crash
Bank Bailout Real Estate Correction
UNITED STATES HOUSING MARKETSINGLE FAMILY MEDIAN PRICE
$-
$50,000
$100,000
$150,000
$200,000
$250,000
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
US Census SF Home PricesAdjusted for Inflation
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1940 1950 1960 1970 1980 1990 2000 2010
Copyright 2011 - ReVest America, LLC
Harvard
Copyright 2011 - ReVest America, LLC
RentalDemand!
RentRent-Operating Expenses-Operating Expenses=Net Operating Income=Net Operating Income-Mortgage Payment-Mortgage Payment= Cash Flow= Cash Flow
Asking Price =Asking Price = $250,000$250,000Annual Gross IncomeAnnual Gross Income $ 24,000$ 24,000-Vacancy Rate 5%Vacancy Rate 5% $ 1,200$ 1,200
= Effective Gross Income= Effective Gross Income $22,800$22,800
• Property Taxes• Insurance• Attorney/Accounting Fees• Property Management• Repairs and Maintenance• Utilities• NOT Mortgage Payment
Total for Example $ 8,000
Effective Gross Income $ 22,800- Operating Expenses $ 8,000= NOI $ 14,800
If I invested my cash with no mortgage, If I invested my cash with no mortgage, what would be my annual return?what would be my annual return?
NOINOI $ 14,800$ 14,800÷ Purchase Price÷ Purchase Price $250,000$250,000= CAP Rate= CAP Rate 5.9%5.9%
If I invested my cash with no mortgage, If I invested my cash with no mortgage, what would be my annual return?what would be my annual return?
NOINOI $ 14,800$ 14,800÷ Purchase Price÷ Purchase Price $225,000$225,000= CAP Rate= CAP Rate 6.6%6.6%
Asking Price $250,00030% Down Payment $ 75,000= Mortgage Amount $175,000
Annual P&I (6%=$1049/mo) $ 12,588
Effective Gross IncomeEffective Gross Income $ 22,800$ 22,800Operating ExpensesOperating Expenses $ 8,000$ 8,000= NOI= NOI $ 14,800$ 14,800- Debt Service- Debt Service $ 12,588$ 12,588Cash FlowCash Flow $ 2,212$ 2,212÷ Cash Invested ÷ Cash Invested (w/closing costs)(w/closing costs) $ 80,000$ 80,000Cash on Cash ReturnCash on Cash Return 2.8%2.8%
Gross IncomeGross Income- Vacancy Rate- Vacancy Rate= Effective Gross Income= Effective Gross Income- Operating Expenses- Operating Expenses= Net Operating Income (NOI)= Net Operating Income (NOI)÷ Purchase Price÷ Purchase Price= CAP Rate= CAP Rate
Gross IncomeGross Income- Vacancy Rate- Vacancy Rate= Effective Gross Income= Effective Gross Income- Operating Expenses- Operating Expenses= Net Operating Income (NOI)= Net Operating Income (NOI)- Debt Service- Debt Service= Cash Flow= Cash Flow÷ Cash Investment÷ Cash Investment= Cash on Cash Return= Cash on Cash Return
Greg Rand, CEO
