There?s a lot of information about selling real estate out there. It all sounds so simple, you buy cheap properties rent them out and just rake in the dough. How can it go wrong, right? If it was that simple, why would you even need help getting this information in the first place?
Equity isn?t everything, just because the house is selling for cheaper then you think it?s worth doesn?t mean you?re gonna be able to make money off it. You have to look at more then just the equity, you have to make sure what you?re getting is really gonna pay off. If you buy your rental properties based on equity alone, you are going to end up with some that are just sucking you dry.
You need to know how to really judge the deal you?re being offered. You need to be able to know for sure that you are going to be turning a profit. Of course if you?re reading this you?ve already pieced together that you need to know more. Information is power and you aren?t going to settle for the bare basics.
One of the best ways to analyze the value of the real estate is Net Operating Income. Net Operating Income or NOI, sounds complicated but it?s really not. What it boils down to is the market rent minus vacancies and expenses. This still sounds slightly complicated, but it?s an invaluable tool. You need to be able to figure out the Net Operating Income of any possible rental properties.
Alright I?ll explain it a little further for anybody who is still confused about Net Operating Income. If you understand the basics of it feel free to skip this paragraph. First you figure out the gross rent possible. Then you subtract an allotment for vacancies you might have. Then you subtract all of your operating expenses. What you are left with is your Net Operating Income.
Now once you are able to figure out your Net Operating Income, you get a much better perspective of the property?s worth. Now that you know your Net Operating Income, you know how much debt the property can afford. Take into account the interest rate and duration we can get on a loan, and we can see how much you can really afford to spend on the property.
With the Net Operating Income you have numbers you can show to the seller. It will be a very important bargaining chip. You can show the seller exactly how much you are going to need to pay for expenses, and how much rent you are expecting to get. It will help you and the seller see eye to eye, and it should make him understand why you are offering the price you are offering.
Nobody wants to lose money, if you don?t evaluate the Net Operating Income of a property you are risking your wallet every time. Enough caution though, I?m sure you understand the risk by now. Since you?re still reading, I?m guessing you?re still interested in more information.
If I was you, I?d want an actual example of evaluating Net Operating Income. This article might make sense to you, but everything is proven in practice not theory. Don?t worry we?ve got you covered there. James Orr is a full time real estate investor, and he has came out with an audio CD that will show you how it all works in real use.
Don?t take my word for it though, check out James Orr?s ?How To Analyze Deals Volume #23 for yourself.
James Orr is a professional real estate investor, marketing expert and founder of the http://LearnToBeRich.com on-line investment game.
You can get a free real estate course and fully analyzed real estate deals and his blog by e-mailing him at freerecourse@learntoberich.com or visit the [http://LearnToBeRich.info] for more great articles and information.
manifest jon favreau calculator passport eva longoria the avengers avatar the last airbender
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.