I've been remiss in not telling you that I've written several new articles recently and have a few more in the pipeline. So, here are some previews, with links to the full articles:
The Cash-on-Cash Conundrum, Part 1
Life is too complicated; we have too many choices, too many options, too many channels on cable TV. It’s not surprising that sometimes we crave simple answers to complex questions.
I see that mindset very often in my interactions with real estate investors. They yearn to embrace the “50% rule” or the “2% rule” or some other shortcut that will help them cut to the chase and decide if a particular property is a good deal or not.
One metric that is relatively simple and historically very popular is the Cash-on-Cash Return (CoC). I encounter many real estate investors (more than a few of whom have a net worth significantly greater than that of this writer) who zero in on that metric like a heat-seeking missile whenever they consider buying a property. What exactly is Cash-on-Cash Return? How do you calculate it? What are its strengths and weaknesses? Is it a good metric, and perhaps more important, is it good enough?
(part 2 coming soon)
Real Estate Investing: Time to Remember the Lessons of History
As the summer 2013 begins to cool off, many real estate markets are finally starting to heat up. For a lot of folks, who have slogged through five of the worst economic years in memory, it feels a bit like we’ve just been released from the locked trunk of a car.
The temptation now is to celebrate our release from investing confinement by jumping back into the market with both feet. Before we do so, however, it would be wise to reflect on a few of the lessons of recent history.
There were many reasons for the financial meltdown, but one of the biggest surely was the belief that real estate inexorably increases in value over time. To many people, that looked like a law of nature. The reality turned out to be different, and now, as property values start to rise, we have to resist the temptation to start believing this all over again. If not, we will simply create another bubble and repeat the cycle.
for those of you who use our RealData Real Estate Investment Analysis software:
How to Create Best-Case and Worst-Case Property Analyses in REIA Professional
You already know that pro forma property analysis is an essential part of due diligence before jumping in and spending your money on a real estate investment. You also know the value of the pro forma analysis is only as good as the care and consideration you give to all your assumptions about the purchase, operation and sale of the property. Part of being a cautious and calculating investor is to consider best-case assumptions, worst case assumptions and some case in between. Fortunately, this is an easy matter with RealData’s REIA Professional.
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