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Attention ALL Veterans, Unemployed Veterans and friends of Unemployed Veterans! | PRLog

Attention ALL Veterans, Unemployed Veterans and friends of Unemployed Veterans! | PRLog

Cap Rates for Buying Investment Property

Cap Rates for Buying  Investment Property

December 20, 2013 By Tim Cook

Real estate investors buying investment property undoubtedly have a clear understanding about CAP rate (or capitalization rate) and the significant role that CAP rates play in real estate investing and investment decision-making.

CAP rate, after all, is certainly one of the most popular rates of return embraced by real estate investors, and probably one of the most calculated returns commonly made by rental property analysts.

As a result, any novice getting involved with investment real estate for the first time will surely be confronted by capitalization rates almost immediately.  Yet (not unlike any rental property novice) will undoubtedly not have a clue what the return means or how to calculate it.

This is not a good way for investment property beginners to get started, and does frequently result in some stressful – if not embarrassing – moments when a real estate investor brings it up and they sit there looking dumbfounded.  Therefore, we’re going to explain what capitalization rate means in layman’s terms and won’t get hung up on the technical definition or meaning.  In other words, we just want to explain it in a way that makes sense to a real estate investing novice servicing rental income property in the “real world” and as it relates to the property, not a textbook.

Capitalization rate expresses as a percentage, the ratio between a rental property’s NOI (or net operating income) (i.e., annual rental income less annual operating expenses) and its market value.  So think about the rate as the relationship between a rental property’s annual net operating income and its market value.

Formula

Net Operating Income / Market Value (or Cost)  = CAP Rate

Example

Let’s say a real estate investor has asked you to figure the cap rates on several rental properties currently listed for sale.  One is listed at $750,000 with an NOI of $68,000, and the other $825,000 with $82,000.  Moreover, you are expected to suggest which property appears to be the better real estate investment opportunity based upon the result.

Calculation

$68,000 / 750,000 = 9.07%
$82,000 / 825,000 = 9.94%

Result

Bear in mind, that CAP rates indicate the net operating income’s percent of price.  Therefore from an investor’s point of view, it stands to reason that the higher the rates are the better.  Why, because it suggests that the property produces a higher percentage of net operating income related to its price.

That said, you would suggest to the investor that the property with the capitalization rate of 9.94% appears to be the better real estate investment opportunity.

Rule of Thumb

Cap rates vary from area to area and from investor to investor.  So don’t look for one ideal rate – it depends on your local market and the investment goal of your real estate investors.  Moreover, they don’t provide a true picture of a rental property’s profitability, so never make real estate investment decisions based upon a cap rate alone.

TMC Property Solutions and AllWholesaleProperties.com is a Veteran owned and operated premier wholesale house buyer in the Dallas Fort Worth area and has been helping families with difficult real estate situations and helping them sell their houses FAST since 2000 and offering discount / distressed properties to rehabbers / investors / landlords at deeply discounted prices.  For more details and to take advantage of all the free reports and other resources, visit us online at www.AllWholesaleProperties.com.  You can also download your free report "How To Find Bargain Properties At Rock Bottom Prices" when you subscribe to our buyers list at www.TradeCash4Houses.com .

Have a smartphone?  Download our FREE app “TXHouseBuyer” to receive new hot deals, open house notices, events and much more, instantly on your phone.

AllWholesaleProperties.com - Your One-Stop Wholesale Property Site!

Like what you see, don’t want to miss the next BLOG?   Please be sure to enter your email address in the “Join This Site” button to your right of this BLOG we’ll get you add to our mailing list for future BLOGS.  Don’t worry, we only BLOG occasionally.  Have a great day!

Tim Cook

TMC Property Solutions

1706A Santa Fe Dr

Weatherford, TX 76086

(817) 599-8058 

Proud A+ Rated BBB Members Since 2005!

Building a Relationship with Your Real Estate Mentor; “Don’t Be an “Askhole”

Posted on:  24 Nov 2013  By:  Tim Cook  

I saw that title on an article recently, and I really had to chuckle having just experienced one of those days.  Today, I just couldn’t resist incorporating it into my article, because it spells out perfectly in one word what typically goes wrong in a mentoring relationship.

Everyone that has ever started out in this fascinating business of real estate investing has discovered pretty quickly that they need a mentor (or three).  There is just no getting around it.  This is a business that has a million details and nuances.

Most of us struggle for way too long trying to figure it all out on our own which is usually a bad idea.  The other group of folks, think that someone can save them all the hard work and just answer their constant emails and texts so that they don’t have to do any work at all.

 So what is the correct way to work with a mentor?

I have generally found that most seasoned real estate investors don’t mind helping out new investors.  But there are a few of important rules of this game…

Simply Put;  “Don’t Be an Askhole”

You will be required to do most of the work in building your business.  When someone suggests a book, a particular blog or some other free or low cost material you should read and study don’t even think about saying “I don’t read much; can you just answer my (long list) of questions for me?”

Yes, that has happened to me more times than I like to admit.

Be Respectful of Their Time

If your mentor is willing to spend a little time on the phone with you, schedule a specific time to talk.  Don’t just call them up and expect this person to drop everything to dish out free advice.  Their time is valuable so be prepared, be concise and keep the conversation short.

Can I Buy You a Cup of Coffee and Pick Your Brain?

Don’t say this!

The person you have approached for free help; the one who has information and years of knowledge you value so much, may very likely have some type of course for sale or paid coaching programs they offer.  Or if they are a professional like a real estate attorney, they charge for their services too.  While they are probably more than willing to answer some specific questions or give you some guidance occasionally, they are not willing to “give away the store for free”.  That doesn’t pay their mortgage.

When was the last time you went to the grocery, loaded up the basket with food, and put your groceries in the car without paying?  I’m guessing … “Never”.

When you approach your mentor and ask if you can “pick their brain”, what you are really saying is “Instead of paying you the appropriate amount of money you deserve for you time and years of expertise, let me spend a few hours with you so that I can get all you have to offer for $2.00 or the price of a cup of coffee.”

Know What You Are Willing to Give In Exchange

The best mentoring relationships require give and take.  Can you offer something specific in exchange for your mentor’s time if you are getting a freebie?  If you have internet or web design skills, maybe you can trade services.  At least, be sure to offer. Sometimes that is all it takes; just the offer to reciprocate and to let them know you will be there when they are ready to collect.

Final Thoughts

Don’t be an “Askhole”.

TMC Property Solutions is a Veteran owned and operated premier Real Estate Investment Company and has been helping families with difficult real estate situations and helping them sell their houses FAST since 2000 around the Dallas and Fort Worth Metroplex as well as offering discount / distressed properties to rehabbers / investors / landlords at deeply discounted prices.  For more details and to take advantage of all the free reports and other resources, visit us online at www.AllWholesaleProperties.com.  You can also download your free report "How To Find Bargain Properties At Rock Bottom Prices" when you subscribe to our buyers list at www.TradeCash4Houses.com. 

Have a smartphone?  Download our FREE app “TXHouseBuyer” to receive hot deals, open house notices, events and much more, instantly on your phone.

Your One-Stop Wholesale Property Site!

Like what you see, don’t want to miss the next BLOG?   Be sure to enter your email address in the “Join This Site” button to your right of this BLOG we’ll get you add to our mailing list for future BLOGS.  Don’t worry, we only BLOG occasionally.  Have a great day!

Tim Cook

TMC Property Solutions

1706A Santa Fe Dr

Weatherford, TX 76086

(817) 599-8058 

Proud A+ Rated BBB Members Since 2005!

TMC Property Solutions Launches New Virtual Assistant Services - VA4REI

Whether new at Real Estate Investing and don't know what to do or how to do it, or an experienced Real Estate investor looking to expand your business, we only have some many hours in the day to work in our business.  At some point you will want/need to expand your business by hiring or delegating certain functions and responsibilities and this is where our VA4REI services come in.  Why not delegate the things that are important to you and your business that you don't like, are easy to confirm completed, things you don't have time for, or the patients for.  Hire it out to our new Virtual Assistant Service (see flyer below for details of support capabilities).  Our VAs our highly educated and trained, very dedicated to supporting you and your business and work hard for you.  You are in control of your VA, you assign tasks, you select the hours worked every week i.e. 10,20,30,40, there is no set up fee and there is no contract.  We believe you will be so happy with our support that we don't need a contract.  You be the judge.  Give us a try.  You have nothing to lose.

Get your life back, expand and grow your business, give Tim a call at (817) 599-8058 or Contact via Email for more details and to get started Today!

 

TMC Property Solutions is a Veteran owned and operated Real Estate Investment Company and has been helping families with their difficult real estate situations and helping them sell their houses FAST for more than 13 years around the Dallas and Fort Worth Metroplex as well as  offering discount/distressed properties to rehabbers/investors/landlords at deeply discounted prices.  For more details visit us online at www.AllWholesaleProperties.com or call (817) 599-8058 for more details. 

Your One-Stop Wholesale Property Site!

Like what you see, don’t want to miss the next BLOG?   Be sure to enter your email address in the “Join This Site” button to your right of this BLOG we’ll get you add to our mailing list for future BLOGS.  Don’t worry, we only BLOG occasionally.  Have a great day!

Tim Cook

TMC Property Solutions

1706A Santa Fe Dr

Weatherford, TX 76086

(817) 599-8058 

Proud A+ Rated BBB Members Since 2005!