Investment Properties
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Next time you, take a minute and look at the person featured on the cover of the biggest business magazines. More often than not, they have wealth most of us only dream about. But how did they get there? The wealthiest people in the world have built their fortune by including real estate investments in their portfolio. House On The Coast partners can provide the tools needed to make smart decisions when considering an investment property. From helping you determine local rental rates, ROI (return on Investment) studies, and property management, we have the resources to help you make the best investment choices
TERMINOLOGY
Gross Potential Income (GPI)
Gross potential income is the expected income a property will produce, without deductions, for expected vacancy or credit loss.
Gross Potential Income calculation – Defined
Gross Operating Income (GOI)
This calculation takes into account losses due to vacancy and non-payment.
Detail of the Gross Operating Income – Define
Gross Rental Multiplier (GRM)
Although not the most precise of tools, the GRM can give you a quick comparison tool to decide on whether to do a more thorough analysis.
Get Gross Rental Multiplier – Defined
Net Operating Income (NOI)
Includes the operating expenses such as management fees, repairs, janitorial, etc. for the NOI.
Net Operating Income calculation – Defined
Capitalization Rate (Cap Rate)
By using other properties’ operating income and recent sold prices, the capitalization rate is determined and then applied to the property in question to determine current value based on income.
Capitalization Rate Calculation – Defined
Cash Flow Before Taxes (CFBT)
We take net operating income and subtract capital cash expenditures as well as debt service, then add back loan proceeds and interest income.
Cash Flow Before Taxes – Defined
Cash Flow After Taxes (CFAT)
This one is easy, as it’s the CFBT with taxes subtracted.
Cash Flow After Taxes – Defined
Break-Even Ratio
dd Debt Service to Operating Expenses and divide by Operating Income.
Break-Even Ratio – Defined
Return on Equity – Year One
This is the percentage return on your cash investment the first year.
Return on Equity – Defined
INCOME PROPERTY INVESTMENT ANALYSIS
House On The Coast offers a variety of tools to analyze your real estate investment opportunities. By inputting various elements of a transaction (price, loan amount, payment, expenses, income, tax bracket, depreciation, vacancies, estimated appreciation, etc) we can prepare a 10 year financial analysis that includes annual cash flow, return on investment, return on equity, debt coverage ratio, capitalization rate, tax benefits, gross rent multiplier, estimated sales proceeds and other key metrics that help determine the projected performance of your investment over time.
Give us a call today and we’ll prepare a full investment analysis at no charge to you. In less than 10 minutes we can help you value, understand and prepare for your next real estate investment. For a full definition of these terms and how they’re calculated, see our special section on investment strategy metrics and terminology.
