How Do You Determine a Good Investment?

If you’re thinking about purchasing an investment property, it’s smart to do some deal analysis first.

How do you analyze an investment property deal? There are three factors in deal analysis that you need to be familiar with: the GRM, or gross rent multiplier, the cap rate, which is the rate of return on the sale price, and ROI, which is your return on investment.

To show you how to calculate each of these important factors when analyzing a deal, I’ll use one of my clients’ recent purchases of an investment property as an example.

This client bought a property for $750,000 and put 25% down. His scheduled gross income is $88,830 and his debt service is $54,312.

Let’s calculate the GRM first. The GRM is important because it will let you know how long it will take for you to see a return on your investment. The GRM formula is the sale price divided by the scheduled gross income. With this in mind, we would divide this particular client’s initial sale price of $750,000 by his scheduled gross income of $88,830, which gives us 8.44. This means that this client can expect to see a return on his investment in about 8.5 years.

Three factors that will help you determine whether a property is a good investment.

Next, let’s determine the cap rate on this property. The cap rate refers to the rate of return on the sale price. To find out the cap rate, we’ll divide the net operating income by the sale price of the property. In this client’s case, we’ll divide $54,852 by $750,000, which gives us 7.31%.

Finally, to determine the ROI, which is basically the return on the down payment, we’ll divide the client’s cash flow by his down payment. Cash flow is calculated by subtracting your service from your net operating income. The ROI is about 2.9% in this instance.

In order to determine whether a real estate investment fits your real estate goals, it’s crucial that you analyze each aspect of every deal that interests you. A good real estate team will have systems and tools in place that will run all of the numbers for investor buyers, so be sure that your agent can do this for you.

If there is any way I can help you run a deal analysis on an investment property, or if you have any questions about real estate in general, please don’t hesitate to contact us by phone or email. I look forward to helping you!

5 Ways to Get Your Home Sold for Top Dollar

If you’re looking to sell your home for the highest amount of money possible, you may be wondering which improvements will make the most difference in offer price. Today I’d like to share five improvements you must make to your home in order to sell it for top dollar:

1. Work on the landscaping. Weeds, dead plants and overgrown grass can negatively impact your curb appeal and potentially cost you a sale. Your lawn is going to be the first thing that potential buyers see when walking into your home, so be sure to keep it in as close to perfect condition as possible.

2. Be sure that the interior and exterior paint are in great condition. Paint is one of the most cosmetically appealing aspects of your home. Think about it this way: if you wanted to sell your car, and the paint was fading, would you expect a dealer to give you top dollar for it? Absolutely not.

3. Clean the floors and carpet. Cleaning or replacing your floors can make a big difference in the kind of offer you receive from a buyer.

4. Make sure your home is clean and clutter-free. I’m talking about having the home professionally cleaned from top to bottom. Nothing deters a buyer more than a dirty home because it tells the buyer that the home has not been well-maintained.

5. Use professional photography to market your home. I pay for professional photographers on all of my listings, but that’s not something that a seller will incur as a cost. I’ve seen million-dollar homes look completely unappealing with low-quality photos, so photographers are definitely a worthwhile investment. When you have buyers looking at your house every day online, you want to make sure that your home is being shown in the best possible light.

Nothing deters buyers more than a dirty home.

If you have any questions on this or anything else about selling your home for top dollar, give me a call to schedule a free consultation with me. I look forward to hearing from you!

3 Easy Ways to Make Your Offer More Attractive

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Today I want to talk to you about buyer strategy. Because the market is strong right now, buyers often find themselves in multiple offer situations. What can you do as a buyer to make yourself stand out? Here are three important courses of action you can take:

1.    Get your loan pre-approved. This will give you a clearer picture of your buying power.
2.    Position yourself as a cash buyer. In this market, sellers will always choose cash buyers over other buyers because cash buyers can close in seven to 14 days.
3.    Package your offer to include information about yourself and why you see yourself in a particular home. When we submit an offer, it is usually 20 to 40 pages long and includes a lot of information about the buyer. This will attract the eye of the seller.

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Sellers will always choose cash buyers over others.

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If you have any questions or would like any more details about buyer strategy, please email me or call me for a free consultation. At our meeting, I’ll even give you a copy of my new real estate book as well as our VIP buyer brochure, which contains a wealth of information that could save you thousands of dollars when buying a home. Looking forward to hearing from you!