Blog > Blog > Archive by tag 'cash flow'

March 4, 2010 at 9:35 pm

Real estate investing can be a lucrative and rewarding enterprise. It can also be a frustrating and profitless exercise. You could write a 1,000 instructional book on all the dos and don’ts of investing, but perhaps the first and most important question to as is simply “Why?” “Why should I invest in real estate and not put my money in savings or stocks?”

The most important benefits of real estate investing are related to the generous return on investment and the ability to control your own destiny. Real estate offers a great way to make significant profits quickly for the self-starters out there. Here is a detailed breakdown of some of these benefits: Read more

February 8, 2010 at 3:51 pm

One of the most important things every investor needs to do before purchasing a property is a profitability analysis. At first glance, many deals seem great, but upon further review turn out to be less than ideal. You just can’t tell for sure until you do the numbers. That’s where this spreadsheet might come in handy.

If you have Microsoft Excel (or OpenOffice), this financial spreadsheet will do the analysis for you.  I find particularly useful when scrutinizing deals as you can quickly determine if a property is worth further research by simply plugging in a  few numbers. Simply enter the rents, expenses and financing and it figures out how profitable the investment will be. Of course, this is a very simplified spreadsheet. It does not account for major repairs, appreciation or tax benefits. However, it should give you a realistic snapshot of an investments potential.

I like to pay particular attention to both cash-on-cash return, which consider real-world financing scenarios, and the always popular cap rate.  The percentage cash-on-cash return tells you how much money you will get back in a given year for the money you put it, while the cap rate is the yearly return assuming the property was purchased with cash.

You can download this spreadsheet for yourself by clicking on this link: Rental Property Analysis. Hope it comes in handy.  If you have any questions or comments of the spreadsheet, please contact me.

July 30, 2009 at 10:04 am

I always get a kick out of the fact that everybody and their brother is talking about short sales these days. I don’t doubt that you can find some great deals out there via the short-sale route, but these deals generally turn out to be a waste of time. Consider these issues:

  • Most sellers and/or their agents don’t know what they are doing – People seem to have this odd impression that even though they owe $200,000 on the loan, they can just put the property out on the market for $120,000 and short-sell it without the bank blinking an eye. No though for protocol, valuation, just a lazy desire to have someone else shoulder the impact of their foolish purchases
  • The process is time consuming – A two to three month turnaround is certainly not unheard of to close a short sale. With ever changing lender practices and market environments, what might seem like a good deal today, might not seem so great three months from now when it comes time to close. I have seen buyers get tied up waiting on a short sale, only to pass up other great (and easier) deals while they wait.
  • Wasted effort – Considering how time consuming the process can be, its amazing how many owners and listing agents put these properties on the market when they are 15 days from foreclosure. You end up putting an offer on the table, jump through every hoop imaginable, and the property ends up getting foreclosed on before you can get anything done.
  • There are plenty of great foreclosure buys – I stay plenty busy, and find tons of great deals from the seemingly endless supply of foreclosures that are constantly coming on the market. That isn’t changing anytime soon either. No matter what kind of investment property you are looking for, there are always plenty of properties that will fit your criteria coming on at any given time. Why jump through so many hoops to possibly make a deal when something just as good is right in front of your nose?

In short, for most investors, the short sale is not worth messing with.  In most situations at least. That is not to say that you shouldn’t consider giving them a look, but don’t let all those so-called gurus make you think it’s so easy. Just like anything else, “there ain’t no such thing as a free lunch.” There is a lot of hard-work that goes into making these deals work and if you are looking for a quick buck you’re better off looking elsewhere.

January 13, 2009 at 3:18 pm

Now that the giving season of the holidays is over it’s time for another kind of giving season: giving to the IRS. With 2009 here it’s time to start thinking about taxes. Your 2008 tax returns aren’t due until April 15, 2009, but  it never hurts to get an early start. Read more

October 30, 2008 at 12:58 pm

We all know them, we all hate them. They are pigeons. Or if you prefer, “rats with wings.” As with squirrels, they are fine in rural or suburban settings where there numbers are limited, but in urban areas they can be a real pain. They are noisy when they roost and I don’t need to tell you about the mess they leave behind. So how do you get rid of them? Read more

October 29, 2008 at 3:10 pm

In the current economic environment, I see a lot of people worrying about their own personal economic situation. The typical pattern is to pull back on expenditures and investments, which is a natural and understandable reaction. For many people, this conservative approach is the best way to weather a storm like this. However, for the more adventurous at heart, times like these are not time for panic, but of opportunity. The chance to make profit through real estate might be the best it will ever be in our lifetimes. Read more

September 12, 2008 at 2:43 pm

 

Whether you utilize a professional inspector when buying properties or simply rely on your own walkthrough, you can’t possibly know everything about the building at first glance. Unless you are from the Planet Krypton, you can’t discern the condition of the sewer lateral without taking additional steps. Read more

September 10, 2008 at 2:12 pm

If you read this blog often you know how much of a concern I consider copper theft. These guys rob investors blind and the world seems to be unable to stop them. Most of the time. Every now and then these crooks get caught. Read more

September 4, 2008 at 10:42 am

I’ve been posting regular updates on what I have been seeing in the investment real estate market since I started this blog, but I decided I needed to develop a method to my madness. These updates will now come on a quarterly basis with occasional updates interspersed throughout the year. Read more

August 11, 2008 at 5:01 pm

Other than which building to buy, the most important question to ask yourself when investing in real estate is “How am I going to pay for this?” If you’re loaded with cash and have a ton of equity built up in your house and other investments, this is a pretty easy question to answer. But for most of us, things aren’t quite so simple. Read more

August 7, 2008 at 5:47 pm

One of the most common questions landlords face when managing their apartments is whether or not to allow pets in their property. We all know the negative side of having pets: they can pee on the carpet, scratch hardwood floors, chew on cabinets corners… You get the idea. But if you don’t consider the positive aspects of allowing them in your rental units you could be selling yourself short. Read more

July 21, 2008 at 3:49 pm

In March, I posted a story about duplexes suddenly becoming a viable, cash flowing, option for prospective investment real estate buyers. Four months later, I’m here to highlight the topic again. But this time, I’m not talking about two families. They are still an increasingly attractive buy, but the real surprise in the past few months has been how lucrative buying up single families has suddenly become in the St. Louis investment real estate market.

Read more

June 11, 2008 at 4:07 pm

Technology is a glorious thing. Zilpy, not to be confused with Zillow (which I have always found unreliable), is a new website that tracks rental rates and statistics across the country. It just might be the answer to the age old question of how much to ask for rent on a unit. They pull these statistics from all over the internet from sites such as backpage.com and apartmentfinder.com and use them to populate a surprisingly versatile site. Read more

May 27, 2008 at 4:43 pm

Just like radiators, I’ve always thought window air conditioners get an unfairly bad wrap. They are relatively cheap (usually between $100 and $300 per unit), most models are efficient if properly installed and there is no need to install expensive ductwork throughout the building. Read more

May 14, 2008 at 4:50 pm

Just when it seemed that increased security measures at local scrap yards were having a positive effect on copper theft, spring had to hit. Over the winter, even buildings that weren’t secured properly seemed to be holding onto their copper longer than usual. In the past couple of weeks, as the temperatures have been rising, I have defintely noticed an increase in theft of copper in St. Louis City properties. Read more

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