Too many investors have a quick 1% rule or use the gross multiplier or use the cap rate (capitalization rate) but these methods can get an investor into trouble since they are kind of like sitting on a 2-legged, or worse, 1-legged stool and are not as balanced as when you use a cash on cash basis.

The gross multiplier method just plain stinks. It does not take into account expenses or financing. The cap rate is a little better but does not take into account financing.

The cash on cash basis that I teach in my investment classes takes income, expenses, and financing all into account. You could have a 10% gross multiplier rate that when you add in expenses and financing produces a 10% loss! You could have a 5% cap rate that when you add in financing produces a 5% loss! But when you have a 6-8% and maybe 10% cash on cash return, you know you have a balanced property in hand.

My classes are one on one unless you want to bring someone else along and the classes are FREE. Give me a call for an appointment today and start investing safely.

Thanks and "Don't keep me a secret--I'm never too busy for your referrals!"
Rob (FREE 2-10 Home Warranty with every home you buy or sell through me!!)
Rob Lang, ABR, ePro, GRI Realtor®
Rob's Blog at www.ActiveRain.com/blogs/langrob
Realty Executives, Hedges Real Estate (four convenient locations)
112 E. 10th, Eudora, KS  66025 
1037 Vermont, Lawrence, KS  66044
3300 Clinton Parkway Ct., Lawrence, KS  66044
300 Rockfence Place, Lawrence, KS  66049
785-393-2274 (cell)   785-542-1661 (fax)
Voice Messages may be left Toll Free at 866-800-5353
langrob@sunflower.com
http://www.letrobdoit.com/
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