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Of course it isn’t difficult to find a real estate agent, but there are good and bad ones out there. The following tips should help you find the right one for you.

Your Real Estate Purpose

Which agent is best for you depends on your goals. If you are buying a home for yourself, for example, you don’t need nor want an agent that is the top seller of commercial real estate. You want one that knows houses, and can help you quickly narrow your search to those that are right for you. In that case, call a few agent who have listings similar to the home you hope to find. See if they can relate to and understand what your needs are.

On the other hand, if you are looking for commercial real estate, you want the agent that has the experience in that area. Again, a good start is to pull out the newspaper and some real estate guides to see who is currently selling the type of properties that you are looking for. Talk to a few agents for a while to see if they have the experience and knowledge necessary to help you find the right investment. Continue reading ‘Finding a Real Estate Agent – Six Tips’ »

One of the most misunderstood, but important, terms in real estate investing is the Capitalization Rate or cap rate for short. This key metric is at the heart of all income property investments and allows investors to compare multiple properties to one another by taking into account their expense load. Unlike the GRM which only accounts for a property’s Purchase Price and Gross Scheduled Income (GSI), the CAP Rate also accounts for a property’s expenses, with consideration for operational efficiencies or mismanagement as the case may be.

CAP Rates are basically the savings rate or yield of a real estate investment in which you pay all cash. For example, a 10% CAP property would yield a 10% cash-on-cash return if you purchased it with cash and no debt. You calculate a property’s CAP rate by simply dividing the Purchase Price by the Net Operating Income (NOI).

When calculating a CAP rate, it’s important to properly account for expenses. Since your NOI is calculated by subtracting your expenses from your GSI, understating expenses will overstate your NOI and thus your CAP rate, making the investment appear better than it truly is. The key is to make sure that you verify as many actual expenses as possible (taxes, utilities, management, etc.) and predict others as realistically as possible (maintenance, reserves, etc.). Your goal should be to arrive at a realistic CAP rate for the investment during your Due Diligence period so you can determine whether or not to move forward with the purchase.

Continue reading ‘Real Estate Investment Training – Understanding CAP Rates’ »