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Beginner Real Estate investing: Key Terms
When it comes to investing in multifamily, it is important to know the key terms to analyze a deal!
Cash FlowCash flow is the life of investing in real estate. This is the total amount of money being transferred in and out of your properties. Simply put, this is your income minus expenses. There could be additional sources for besides just rent including laundry income if you chose to offer coin op laundry. Be conservative when estimating your income and expenses. Run them on a worse case scenario. A mistake to avoid is to just include your mortgage, insurance and taxes and your monthly expenses! Others to include possible flood insurance, repairs, vacancy, property management, and capital expenditures.
Cash flow= gross income- operating expenses
Depreciation/AppreciationOnce you purchase the property, you can identify if the property has gained value or lost value. It is not uncommon to factor in 1-3% a year for appreciation on a property. Keep in mind this is speculative and you can’t bank on appreciation when you purchase. For example if you buy a property for 300k, your property can be worth 303k to 309k after the first year.
Net Operating IncomeThe income on the property minus all necessary operating expenses. This ... more

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