REAL ESTATE INVESTMENT
INCOME VS. APPRECIATION
GOALS
Positive cash flow: Rental Income; return on Investment ROI
Appreciation: Capital gains; flips and trophies
Tax implications….
Who are the
clients?
Yourself
Contractors
Anybody who owns a primary residence
Anybody who is credit worthy
Where is the financing?
Mortgage lenders/banks/helocs
Where are the properties?
Finding the hot pockets
Staying ahead of the curve
Coatesville
What features are
desirable?
Rentability
Condition
Time is money
Goals: ROI/Capital Gain
Ways to establish value:
Income, replacement, market comparison
The gross rent multiplier formula for value is as follows:
Value=potential annual gross income X gross rent multiplier Ie
8+$1,200,000(value)/$150,000 (potential annual gross income)
Lower the GRM better the deal
The cap rate is the net operating income divided by sales price or value
(net includes expenses other than debt service and capital improvements)
Cap rate=net operating income/value
Ie
10=$120,000 (potential annual net income)/$1,200,000 (value)
Higher the Cap rate better the deal
Close a deal: work the neighborhood
Owner occupants
Investor owners
Bragging rights
Tenancy
Location, Location, Location
Section 8 housing assistance program
Rental listings:
Show a unit; collect a client
Rent a unit; get a repeat client at the end of term
Covert to a first time buyer now, or later
Build your sphere of influence with that tenant’s acquaintances