Investor’s Frequently Asked Questions

What is cash flow vs appreciation?

Lower risk deals tend to have more stabilized values but produce cash flow over long terms that help meet investor cash flow goals. Appreciation and value-add deals can generate a large profit but take on more risk to attempt those objectives.

What is cash on cash return?

Percent of cash out of an investment in a year relative to the amount of cash invested. It does not consider time or money. It is a very commonly used metric, but not often used professionally.

How do I know if I can afford to invest in real estate?

You should talk to a trusted/ recommended lender to get a sense of your financial situation and what you would be able to afford.

Are there any tax benefits associated with investing in real estate?

There are many tax benefits. The easiest method is to have a rental property because you can deduct expenses such as depreciation, repairs, interest, and taxes that relate to that property.

What is NOI?

Net Operating Income- Income after vacancy and expenses and before debt service.

What is the 1% rule?

The 1% rule states that your monthly rental income should = 1% of your total purchase price.

What is the rent ratio?

Monthly rent/ purchase price or market value.  Should be 1% or more. 

How do I find a good deal?

The best way to find a good deal is to use a trusted agent. If you are purchasing a property, the agent will be no cost to you and an experienced agent will know how to find the best deal.

What is CAP Rate?

Capitalization rate- percent of cash return in the first year if the property were purchased for cash. The ratio of NOI to purchase price.