At times folks decide it is time to try real estate. Perhaps you have inherited a home from your parents or see an investment property nearby. This useful article summarize 4 key metrics..
- cap rate; Property cap rate = Net Operating Income/Current Market Value – article provides an example
- Cash flow; cash flow = NOI – capital expenses & debt services – some can be gleaned from the seller but this will be specific to your financing and expenses you anticipate given the property features and condition.
- Cash-on-cash return (COC) – Great explanation of what you pay to buy and rehab if needed. This is the metric that helps you compare to other investments – like stocks.
- Vacancy loss – planning for vacancy is needed; finding ideal renters who want longer leases are like diamonds to be treasured.