Deciding if a property is a good investment

Real Estate Investment Analysis

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Deciding if a property is a good investment

Real Estate Investment Analysis allows you to quickly avaluate and compare several potential investment properties and decide which one is for you. It will help you decide if a particular property is the right investment for you.

Using figures you can easily find you can quickly determine the financial plusses and minuses related to a partilcular piece of property.

The first step to effective Real Estate Investment Analysis is to understand the income and expenditure related to particular investment property.

INCOME: Rental income is generally the first and only income stream most investors consider for an investment property. However in addition to the rental income you gain from an investment property your situation may warrant considering the capital gains as income.

I believe it's better not to sell...

Hint: When you want cash, consider refinancing your real estate investments - see RETIRING USING YOUR GROWING PROPERTY INVESTMENT EQUITY BASE if you keep your real estate investment properties you are not selling your retirement plans. You will need to consult an accountant to find the details of how you can declare capital gains as income but the general principles are out lined in this article: MAKE THE MOVE FROM HOBBY TO PROFESSIONAL INVESTOR

EXPENSES: There are two general types of costs (EXPENSES) associated with owning an investment property: interest costs and holding costs.

Income - Rental Return

The first thing you need to understand about rental return on an investment property is that verbal estimates by real estate sales people can be very misleading. That being said the way to determine a better idea of the real potential rentl return that a property might bring is to find out what similar prperties are renting for in the same area.

How to Calculate Rate of Rental Return

Rental return is calculated as a ratio against buying price. A rule of thumb calculation for rental return that many real estate imvestors use as a quick comparison is as follows:

Gross Annual Rent / Total Purchase Price Expressed as a Percentage

For more detail on calculating rental return, see How to Calculate Rental Return On a Real Estate Investment For example if you purchased a rental property for $300,000 and were renting it out for $300 per week then your rental return would be calculated as follows:

(300 * 52) = $15,600 / $300,000 (times 100 to express as a percentage) = 5.2%

I have found that if the resulting figure is in the vicinity of 6% or over you are in good shape. In the example above the rental return is a little on the low side but not by very much, so if other factors are positive there is a good chance that you will soon be getting above 6% just because of the normal increases in the rent you can acheive for this property.

For example just say that the next year the rent goes up by 15% then you are receiving $345 per week. In which case your return would be 6%. From that point on you are in a very healthy financial position with this property.

(345 * 52) = $17,940 / $300,000 (times 100 to express as a percentage) = 6%

Expenses

In terms of analysing a real estate investment a percentage of purchase or advertised price as a factor to get a ball park figure for how much it will cost to own and run that property. The first thing to do is determine the interest cost per year by multiplying the advertised price by the interest rate you would be paying.

Then find the estimated running costs by multiplying the annual rent received by an expense factor, (you may need to ask your agent or another knowledgeable investor for what applies in your local area.

An example will make this much clearer:

Go from this page Real Estate Investment Analysis To The Parent Real Estate Investment Methods Page Or Return To Freedom Steps With Property Investing

How Can I Make Money Online? - An Inside Look at How You Can Make Money With Online Forex Trading

By Grant Dougan

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A lot of people have dabbled in currency trading so they can make more money. Absolutely anyone with a cyberspace connection can trade forex online which has caused plenty of people to dive into the forex markets with dreams of gaining money.

We've heard a lot of buzz on forex markets because of how many people have started using this as a "do it from home" business. Since more individuals have begun earning terrific money online trading currencies, there has been lots of additional people searching for information on trading forex. Ok everyone - let's look at how to make money!

The key principle is the same as stock trading.: You need to buy at low prices and sell high. As an example, the dollar from Canada is valued at around 78 cents in US currency right now. If you believe that the Canadian dollar is going to jump in value, then obviously the strategy is to purchase it today and then unload it when the value increase.

Currency traders spend plenty of time examining currency pairs (the US dollar and Hong Kong Dollar are one example of a currency pair), looking for signals or economic indicators so that they can spot buy and sell trades and make some money.

Traders will also utilize forex trading softwares that can help them spot trading signals. All the professionals will use this type of program as it will increase the money they can make.

As you might guess, these programs can make all the difference between a successful trader and someone who loses money. Nobody wants to admit that a piece of software is brighter than them, but many traders that are making lots of money will admit that it's because of a forex software.

Every now and then people are a bit confused by these programs because people think the software will be too hard to operate, yet they're simple to operate. The better ones have been designed by proven currency traders who know exactly how the forex markets run and they have deliberately made the software easy to use.

If you're considering getting into currency trading, it's in your best interest to buy some type of trading software like this so it can help you make profitable trades right away. Usually, these programs can bring in some profitable trades for the trader on autopilot. This way you can let the program make some money for your wallet while you grow your knowledge of the forex markets. Sooner than later you can use both the program and your independent research to make trades.

We should point out that forex trading takes some big nerves and sometimes the instincts of a gambler and it's not something that's suitable for anyone. It requires a particular mentality, but if you're a risk taker that can take care the occasional swings, it can be a great way to bring in an income.

Something that makes currency trading appealing to many traders is the fact that even if a currency drops in relative value, it's highly unlikely to fall all the way to zero. This is a substantial difference over options trading or trading stocks.

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Using a forex trading program gives you a quick way to profit from the forex markets, especially if you are just learning about the markets

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Click here to check out the top-ranked forex program and learn how to start a free trial

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Understanding Your Costs To Help You Calculate Profits Flipping Real Estate.

Calculate Profits Flipping Real Estate

By Heather Seitz

If you've been in the real estate investing business, or more specifically been flipping real estate, for more than a few days, you've inevitably gotten an email that reads something like this:

"Investor's Dream. This property will go QUICK." Property Address: 1234 Main Street Asking Price: $100,000 (Add or subtract zeros!) Value After Repair: $150,000 Less cost of Repairs: $15,000 Profit: $35,000 Details: Needs paint, carpet, tile, new kitchen, update bathroom, some roof damage. Tenant occupied. Need to evict!" STOP! Before you read on... Take a guess at what you think the "real" profit's going to be on this real estate investment...

If you haven't ever gotten an email or fax broadcast like this, then rest assured, you will! I'm about to probably tick off all of the late night infomercials and pitchmen out there!

Sure, I understand that when you've got 30 minutes (or 90 minutes, for that matter), that you've got to sell what's sexy... not what's real!

Now it's my turn to expose the real deal on real estate investing!

This goes for flipping real estate itself (i.e. properties) or simply flipping the contract (also known as assigning the contract).

When you're flipping real estate, you need to be able to calculate the real bottom line and if you're assigning the contract, you need to know your numbers so you don't get blacklisted from investors!

This one piece of information will keep you from getting into trouble because of any "real estate bubble"!

Purchase Costs

Here goes... Have you EVER purchased and sold a piece of real estate for FREE?

If you're not sure what the answer is... It's an emphatic NO...

You are going to have costs to buy, costs to hold and costs to sell. This holds true even if you are buying a property for all cash. (Think title fees, attorney's fees, recording fees, etc.)

If you're not getting a mortgage, your purchase costs are obviously much lower, but nonetheless, there are costs associated with any real estate transaction. Plus, more than likely, if you're relatively new, you're probably not paying all cash for property anyways. You're probably going to be using a hard money investor for your initial real estate investing financing!

For a quick calculation, you can estimate anywhere between 3% - 5% for closing costs to just acquire the property. That's 3%-5% of the purchase price.

Holding Costs

How much is it going to cost you each and every day to own this piece of real estate?

See, if you're making money in real estate, you'd better believe that there are a lot of other people that are going to expect to get paid and they get paid in the form of mortgage interest, property taxes, utilities, property insurance, etc. Each of these is an expense each and every day that you own the property.

Here's an example...A hard money loan on a bread and butter type piece of real estate might run you 15%.

Let's say you got the property for $100,000.

Every month, you are paying $1250 in interest alone.

Let's say that taxes and insurance are another $200/month and then utilities at $100.

Right there, the property is costing you $1550/month - or roughly $50/day.

See, why it's important to know your not only your holding costs on a real estate investment, but also how long it's going to be on the market before you can flip the property.

Selling Costs

Here's the third part of the real estate investing puzzle.

When you want to turn around and sell this piece of real estate, it's going to cost you yet again!

Are you going to use a real estate agent and pay a commission or 3-4-5% or even more? On $150,000, that's anywhere from $4500 to $7500 chopped of the top. Then, you can figure 1-2% in closing fees.

If you can remember this... and apply what you've just learned to each and every real estate deal that you do, you'll be safe flipping real estate in any market.

You see, if it's a hot market, you can calculate less time for holding cost. But, in a slower market, make your offer based on 6 months or 9 months of holding costs. It's really simple math! And real estate really is a numbers game...

Recommended Resources:

Finding Deals: www.motivatedsellermarketing.com Estimating Repairs: www.fixingandflipping.com Finding Contractors: www.servicemagic.com

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About the author:Heather Seitz

Heather is the co-creator of Fixing and Flipping software. It takes the guesswork out of estimating repairs.

Learn how to estimate repairs and calculate profits in seconds. Click below for your free video and mini-course: www.fixingandflipping.com

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Return From Calculate Profits Flipping To Flipping Real Estate  Or go to Freedom Steps With Property Investing

Related Pages

Freedom Steps With Property Investing Flipping Real Estate | Make Money Flipping Property | Flipping the Contract | 7 Tips for Flipping Real Estate | Calculating Costs & Profits when Flipping Real Estate | The Risks Involved in Flipping Real Estate | The Aftermath Of The Real Estate Bubble | Wholesale Real Estate Investing | The End Of The Real Estate Bubble - Is It As Bad As They Say?

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Real Estate Investing, Is it the ultimate way to invest for long term wealth

For better or for worse, I have based my long term retirement strategy on real estate. More specifically, investing in real estate. I have been doing this for about 9 or 10 years now.

You might say "Well that's OK for you, you got in when property prices were low."

My answer would be that prices always seem low when you look back and there is never a time when the prices seem cheap relative to the income and property availability at that time.

With that being said I will say that in the beginning I had to change my attitudes quite a lot in order to best take advantage of opportunities at that time. In other words I had to do a lot of stretching. For example, I live in Sydney, Australia. Back in the year 2000 when I bought my first investment property it was in Brisbane.

Now it would have been much more comfortable to wait until I could afford to pay the $300,000 price difference for roughly the same property in Sydney. But I chose to get started immediately with what I was able to do and defer purchases of investment property in Sydney until the equity I had in my portfolio supported Sydney's more expensive prices.

The point I am trying to make here is that by starting straight away and investing in a well located property in Brisbane, I was able to take advantage of the capital growth of my first property to buy a second and third in Brisbane before I would have been able to purchase my first in Sydney.

Real Estate Values Double Every 7 to 10 Years

You may have heard this before and thought "That might be right, but I'll just wait until prices go down."

The big news is that the best time to buy investment real estate is right now!

Even with the "economic crisis" that we have been thrust into, what is happening? The real estate prices are falling somewhat here in Australia, this is producing great buying opportunities.

My outlook is that in another 2 to 3 years this crisis will be behind us and then 7 to 10 years after that property will have doubled again.

The question is what is your mindset? Do you feel like all your plans for the future have been suddenly made redundant because of outside factors? You can seize the initiative back by setting in place some plans for your future now. Sit down, take a calm look at your current situation and assess where you are and where you would like to be in 5 to 10 years time.

Nine years ago when we bought our very first property after thinking about it for over a year, I never would have believed that today I would be holding a property portfolio worth several million dollars.

In a future post I'll go further into the strategies and philosophical shift that allowed me to do this. It's exciting to sieze the initiative back from thise who will take it away if you let them. The journey has been an exciting one for me and my wife.

What's This All About Anyway?

Recently I took time to think about my many and varied interests. They are so widespread and disparate that even I some times despair at making sense of them.

If I divide up my life into short, medium and long term views then I start to make sense of what is important to me.

The underlying principles of my life have always been and will continue to be my relationship with God and with my family. Being, having, improving and becoming better in these areas is what guides my life. That is who I am. And who I am steers and influences what I do.

So that being said what I do and aim to do is to establish a life of freedom and independence while still being a part of the community and society that I live in.

My next post will be less philosophical and detail the areas that I am working on currently to develop my steps to freedom .

The Holy Grail of Technical Indicators

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By Palmer Owyoung

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The Relative Strength Indicator

The relative strength indicator is one of the most commonly used technical analysis tools available. Unfortunately it is also one of the most misused.

The RSI was a tool developed by famed market technician Welles Wilder during the 1970's as a way to determine whether a market was overbought or oversold. The formula is rather simple with the average number of up closing days divided by the average number of down closing days. So this indicator essentially measures the size of a stock's closing gains and compares it with the size of a stock's closing losses.

According to Larry Connors over at TradingMarkets.com who back tested this indicator from 1995-2006 in over seven millions trades there is no statistically significant edge using a 14 period RSI, which is generally the default setting for this indicator. However when used on a 2 period setting he found that it becomes a very effective tool in one's technical analysis arsenal.

The Two Period RSI

Using the 2 period RSI we define overbought as a reading over 90 and oversold as any reading below 10. What Connors found was that a stock with a reading of 90 underperformed the benchmark index one week later, and a stock with a reading of 10 outperformed the index by an average of .50%. Furthermore he found that as readings became more overbought or oversold the amount that a stock moved was more substantial. For example if a stock had an RSI reading of 1 or below then within a week the stock averaged a 1% gain over the benchmark index, and if a stock had a reading of 99 or more the stock averaged a loss of -.31% compared to the index.

If you'd like to find out more about technical analysis, stock and options trading then please click on the link in resource box below.

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Palmer Owyoung is the Founder of http://www.OptionSpreadTrades.com

A website dedicated to helping the average investor to earn 5-15% a month through option spreads.

Sign up for a Free trading course, and market forecasts at http://www.OptionSpreadTrades.com

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