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.

One core real estate investment strategy when buying income property is to identify positive leverage situations where your CAP rate is greater than your borrowing rate, or interest rate. After all, if you could borrow money from a friend at 6% and invest it at 10% you’d make 4% on every dollar borrowed. The same holds true with real estate, where your goal is to invest as much capital as safely as possible in these positive leverage situations.

It’s important to note that CAP rates move in the same direction as interest rates, so as interest rates (borrowing rate) increase, so do CAP rates, and vice versa. Interest rates are currently at historic lows and so are CAP rates, meaning the return or yield you earn on real estate is low relative to historical norms. However, this has to be taken in context with other available investments, such as the stock market (negative in 2009) or a traditional savings account at your local bank (offering around 1% in 2009). When compared to other traditional investment classes, the yields in real estate look quite attractive.

For more information on investing in real estate, real estate coaching, online real estate training, and additional tools and tips from a proven real estate investment education course, visit http://www.TheresNoFreeLunchInRealEstate.com.

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There are three key components to becoming a successful real estate investor. Surprisingly, they are not money, luck or talent, despite what many believe. Veteran investors, who have a long-term, successful track record, focus on these three things:

1. Systems
2. Relationships
3. Follow-through

Here’s how the system works:

1. Systems: The foundation on which you’ll build your wealth. Follow a proven system and stick to it. It must be a system that has been proven to work in your geographic area and focuses on the type of property in which you want to invest. Once you have a system that works, don’t mess with it; let it work for you.

2. Relationships: Surround yourself with the best of the best experts and utilize their talents as much as possible. Relationships will fuel your business and make it easier for you to become more successful than you ever thought possible. Conversely, if you focus on money instead of relationships, you will find yourself continually running after the next deal, you’ll feel exhausted and anxious, and you’ll be constantly wondering where the next deal will come from. That is why you need to learn how to find these ultimate relationships. Some of the key relationships you’ll need to develop and nurture are:

a. A realtor for your system who understands your type of properties and your target geographic area. You may need to go through many until you find the right match.

b. A banker or mortgage broker whose expertise lies in the investment residential real estate arena, someone who has expertise in getting financing on difficult deals. Often this will not be the banker you are currently using. You need to learn how to discover the exact steps in choosing and working with a quality banker.

c. A real estate-specific lawyer. There are lots of lawyers, but the one you want is someone with 10 years or more of investment real estate expertise. Do not choose your lawyer based on price: that is the ultimate in false economy and could end up costing you thousands and thousands of dollars more in the long run when something goes awry.

d. A network of like-minded, success-oriented individuals. Even if you only see them once a month or so, this network will become a lifeline as you progress along your real estate investment path. Your network will provide you with the positive outlook and impetus to keep you moving towards your success, even as others question you or try to steal your dream. Make sure your network is real estate specific, and make sure your peers are action takers not talkers, players not pretenders. And most important, pick a group that will continually challenge you to get better. You should always feel a little behind whenever you get together with them. This will ensure that the word “average” never enters your real estate vocabulary.

3. Follow-through: This is the component that most don’t want to talk about. Even with the best system in your hand and the most powerful relationships in your life, nothing positive can or will occur without you taking action. Following through on the steps needed to achieve your personal vision is critical. Even if you’re not fully confident in what you’re doing, at least take the first few steps of a proven system. Even the longest journeys begin with the smallest steps!

Claim your FREE copy of “21st Century of Land Banking in Challenging Times(TM) at http://tsi-landbanking.com

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Have you ever thought about investing in real estate but wondered, “Where do I begin?” I cannot answer for you, but I know that I have. In fact, I may not be sitting very far from your chair right now.

Let me tell you a little about myself. I am 37 years old. I did not even know how to handle money until I was 34, and I had quite a bit of debt to repay. I didn’t even have a positive net worth until I was 36. Really! I’ve spent the last year-plus investing into the stock market. Unlike most people, I’m proud to say that I’ve done really well for myself. I am not mentioning this to brag that I am great, but it begs the question, why am I considering real estate then?

There are benefits to learning how to make money in multiple ways, outside of your regular 9 to 5 job or whatever your real hours are. Plus, as an investor, different money making vehicles present themselves as better opportunities at different times. One investment is not necessarily better than another investment type, but the timing is key. There is room to make money on stocks, still, but their best time was during the first few months of the year. Now is the real estate’s time, because you can buy properties for so little money.

Real estate is really imposing, though. I’m still a beginner at this, so I will tell you what I am doing.

1. Go to Investor Clubs

Meet as many people as you can. You will hear some hot topics and buzzwords. Plus, it sets you in motion a little closer toward your goal.

2. Read Books/Listen to CD’s/Watch Videos

One of these is not better than the other. There are many resources to teach you general and specific concepts. Just choose a method you are likely to use. For instance, if you have reading, don’t get books. Watch videos or listen to CD’s. You get the idea.

3. Use the Internet

Similar to the above point, but you can compare more things a lot more quickly.

4. Go to Seminars

Some of these may seem expensive, but like investment clubs, you will meet people. In fact, you will get a chance to do a better job meeting people. Plus, you can learn information that is more focused upon what you want since you are selecting the seminar. The biggest benefit, though, is that you can learn more in a shorter time period.

5. Walk Through Houses

Ideally, you can walk through houses with people who know enough to point out good and bad things about the property. Even if you are alone, you can still notice some things. Plus, don’t forget to talk to the neighbors if they are available.

6. Study Prices

Pay attention to prices in your area–both List Prices and Sale Prices. Notice the difference between them. Notice which areas have which price ranges.

7. Ask Questions

This is the easiest, most effective way to learn. However, most people will not do this, because they don’t want to feel foolish. So how do you get started? Do something easy to get moving and keep gathering information.

Chris Wechner is a beginning investor who succeeded as a stock trader but is learning the ropes as a real estate investor. He is a teacher by nature and targets making seemingly complicated things simple. For more information, you can visit his website at http://detroit-area.blogspot.com.

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There are vast amounts of ways that someone can make a living off real estate investing, some ways involving more risk than others. Slow and steady wins the race most often while the real estate investments that carry the most risk can often offer the highest returns. This risk however can be managed with research and experience. A lot of people have made money by using house flipping, that is why this topic pops up so much in the news. A lot of people have failed miserably with this but of course this won’t make the news.

Investing in rental properties doesn’t provide the almost immediate profit returns that you can see with something like flipping houses but if you plan properly it is a very good form of real estate investing that brings in steady profit. Rental properties are always a good idea, especially if you can identify and grab those golden opportunities.

While there are some risks involved in investing in rental properties, the risk is much lower than in something like pre-construction investment and flipping activities. There are however a few things to consider when buying real estate with the intent to rent in order to make good decisions concerning your investment.

1. Be sure you will have tenants. It is impossible to create a monthly cash flow without tenants. It is sometimes easy to buy a property for very cheap in a run down section of town. Just buying for cheap is not enough. Rather spend a little more and make sure there will be a demand for what you are offering. You see, two things happen if tenants are difficult to get; No monthly income and your property value falls. Why do you think you got that property for so cheap?

2. Know the people in the area. Rather than renting out a large house, it can be turned into multiple smaller apartments (ideal for near colleges and universities). On the other hand this is not a good idea in a typical family home area that won’t be happy if there are college students living next door. Design the rental property according to the specific market you find yourself in.

3. Don’t be greedy. While the goal of investing in rental properties is to make money; don’t price your properties to high or you may find that it will be empty most of the time. It’s always a good idea to look around the area to see what rent other people are asking.

4. Know the market. Research the market for renting properties and buying properties. This will help enormously when you start buying. You will be able to tell the potential of a property, know what the market wants in that area, and be able to negotiate a lot better. The golden rule of any investment is to do your homework.

5. Keep your eyes on the long term goals. Renting real estate is a marathon, not a sprint, with the greater gain coming at the end. You will want to pay off the property as soon as possible by paying as little interest as possible in order to maximize your profits and buy more properties. Rental properties start really bringing in good money when you own 20 or 30, not 2 or 3. The more you own the more money you stand to make.

Brian Menthis is a Real estate investing enthusiast and Chief Editor of realestateincomesecrets.com. He has spent years doing research on strategies and opportunities. To learn more about investing rental property please visit http://www.realestateincomesecrets.com.

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This book was a fascinating look at the life of a man who devoted his life to advertising. His accounts of turning money losing products into household names were brilliant and inspirational. His life lessons shared were priceless. And, I found many of his lessons applied to real estate just as much as advertising.

The easy application of his advertising lessons to real estate was delightful but not surprising. I believe that a good marketer WILL make an exceptional real estate investor.

A marketer must understand it’s audience in order to be able to entice them to take action. This means a good marketer will:

* Determine what the market wants through careful market research,
* Understand what needs to be said and what mediums should be used to deliver that message,
* Be able to appeal to the underlying emotions that motivate the prospect,
* Measure the results of their actions carefully in order to fully understand what messages, mediums and methods are providing the best ‘bang for their buck’,
* Be good communicators, both in spoken and written words.

I believe the exact same skills are critical to success as a real estate investor!

Before we buy a property we spend at least a few months researching the market area. We typically narrow our focus down to an area as small as 4 or 5 square blocks. We find an area that has potential for growth due to increasing employment, improving infrastructure and desirable amenities. Then we learn what the tenants in that area want. Once we understand what area is poised for growth and what properties the tenants of that city are attracted to we go out and find it.

And, because we’ve spent so much time researching the market we already know what are the features to focus on when we advertise to a tenant. We already know what attracts people to the area – whether it’s a short commute to downtown, an award winning school, trendy shops and restaurants or access to the beach. We also know what features of the property are most important to our prospects. If very few places in that area have a large back yard or air conditioning but those are the most desired features we will be sure to emphasize them.

Understanding the market area and the tenants in the area right through to knowing how to market your property to attract the best tenants are critical skills. And, of course, you have to be able to communicate with people if you’re going to negotiate real estate deals and be a landlord!

Claude Hopkins would have made an exceptional real estate investor because he was a master marketer.

Here’s a few additional things Claude writes about that you might want to consider as you think about your next (or first) real estate purchase:

* Always try to get immediate action from your prospect. Tell them what delaying will cost them. In other words, get them to fill out a rental application on the spot because if they don’t the property could be gone before they even have a chance to submit it!
* Do nothing to merely interest, amuse or attract. Do what you have to do to win over your prospect in the cheapest possible way. Fancy ads or high tech videos might work to attract potential tenants, but usually a well worded ad on a free website or a low cost sign placed on the lawn of your property is all you need.
* Answer any questions you have with a test campaign. In our case, we will use Craigslist or Kijiji to advertise a property we’re considering buying for rent (or rent to own). When people contact us we just explain that we don’t yet have access to the property but will take their name and number and will call them when we have it. We don’t share the address but will explain the features and the area of the property. Within a few days we know whether there is demand for that property or not.

And… one final piece of advice because I’ve come close to passing on great properties just because I’d never live in them myself. Claude Hopkins has some wise words on the subject of confusing your wants and needs with those of everyone else:

“We must never judge humanity by ourselves. The things we want, the things we like, may appeal to a small minority.” (p. 24).

How to find money to buy your next rental property, create financial freedom, positive cashflow and massive wealth with Julie’s free Real Estate Investing Starter Tips Guide. Retire a rich real estate investor with tips like: How to find quality rental properties, finding and keeping great tenants, and easy ways to make more money with real estate. http://www.revnyou.com.

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