Real Estate Investment Property can give you Financial Freedom

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Financial Freedom Is Within Your Reach With Real Estate Investment Property

Financial freedom can be yours with real estate investment property.
You can have financial freedom, sooner than you think. Here is a quick overview of how to do it.

1. Start with an evaluation of your current financial position. See this real estate investment finance for an effective strategy to get favourable (lending) results from a bank or other financial institution.

How To Build A Cash Flow Model For Your Real Estate Investment Property

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By Joe Tosolt

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About To Start Investing In Real Estate?

Are you about to start investing in real estate? Or perhaps you've already put your toe in the water but want to learn more. Here is an overview of the factors you need to take a look at in order to project your potential return on an investment.

• Purchase price - obviously, the amount of money you put out for the property is significant in determining your investment outcome.
• The annual appreciation rate at which you expect the property's value to increase.
• How many years you expect to hold the property. Combined with the 2 figures above, this will enable you to estimate a future selling price.
• Number of rental units, and rent you expect to receive from each unit.
• Annual rate of rent appreciation.
• Expected unoccupancy rate - it's important to remember that tenants come and go, and will occasionally leave you with empty rental units. It's best to plan that into your projection.
• Any miscellaneous revenue you anticipate (laundry facilities, etc.), and the rate at which you expect those revenues to grow.
• Property management fees. Even if you expect to manage the property yourself, it's best to budget in an allowance for professional property management. First, this rewards you for the time and effort you invest. Second, it ensures that you are covered if for some unanticipated reason you need to turn the management over to a pro at some point in the future.
• Last, but not least, you need to know your opportunity cost, something that big investors would call the 'cost of capital'. For example, if you can earn 5% by keeping your money in the bank, you're going to want a lot more than 5% for taking on the risk and time investments required by a rental property!
• Annual operating expenses, and the rate at which you expect those expenses to increase over your term of ownership.
• Property taxes and rate of annual increase.
• Insurance and rate of annual increase. It's critical to insure your substantial investment!
• Any miscellaneous expenses, and rate of annual increase.
• Depreciation expense. To determine this, you'll need to estimate the building's assessed value as a percent of the total purchase price.
• Your annual capital investments in the property. You were planning to budget on capital improvements, weren't you?
• Downpayment - how much cash are you putting in upfront?
• Bank fees - how many points do you expect to pay, and what closing fees do you expect to incur if you will putting a mortgage on the property?
• What mortgage interest rate do you expect? And how long will the payback period be?

Now that you've got all the numbers laid out in front of you, you 'just' need to build a financial model which will allow you to project cash flow throughout your ownership term, and then use time value of money calculations to create a present value of those flows. Compare the present value of your future cash receipts against the amount of cash you will outlay upfront. If it's greater, congratulations- you have positive Net Present Value, and this property looks attractive. If the result is negative, it's a red flag-- you need to take another look, because this may not be a good deal for you.

The obvious comment you might have is... "This all sounds awful hard! Aren't there tools which can help me?"

The good news is that there are! In fact you can use an online investment property calculator which will do all of the heavy calculating for you. You simply plug in the numbers, and review the results. Now THAT's some smart investing!

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© 2007 All Rights Reserved

Here's some great news: thorough financial analysis doesn’t need to cost a lot of money or take up much of your time. The Real Estate Genius investment property calculator runs the numbers and calculates the cash flow instantly– you just gather the facts, and plug in your assumptions.

Joe Tosolt is the president of Real Estate Genius, LLC, which empowers property investors with fast, powerful tools for performing discount cash flow analysis and projecting financial returns on prospective property investments. Learn more about this easy-to-use tool at Real Estate Genius.

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Article Source: http://EzineArticles.com/?expert=Joe_Tosolt
http://EzineArticles.com/?How-To-Build-A-Cash-Flow-Model-For-Your-Real-Estate-Investment-Property&id=510360

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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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