Every Real Estate Investor Should Master

When you learn about something, when you are interested in new subjects, you also learn a whole new vocabulary you start using. Well, with real estate investing happens exactly the same. If you are a Real estate beginner or an experienced investor, you must understand and master all the terms and words of the investment vocabulary, especially acronyms, so here is a small list of every acronym a real estate investor should know:

1. PITI

Initials for: Principal (P), Interest (I), property Taxes (T) and Insurance (I). Essentially this means, the “bottom line” or the minimum amount needed when you estimate the acquisition of investment property with a loan. Frequently this is estimated monthly.

This amount is what you would might spend in the investment property over the life of the loan. Every and each month is the frequency of the PITI you have to pay in order to be in good standing. Thanks to this you will know how much rent you should pay.

2. GOI

GOI or Gross Operating Income, is related to the annual income that is collected from the property, including: laundry, parking, storage, etc. and consider any vacancies.

3. LTV

Initials for: Loan-to-Value, this is vital if you’re removing a loan on your investment property, it is estimated by dividing the loan by the property’s value; then, that number is expressed as a percentage. For example, to make it easy: if a loan is $200,000 and price of the property is $250,000, then the LTV is 80%.

You will have more equity in your property and negotiate more if the LTV is lower.

4. DCR

Initials for: Debt Coverage Ratio. This is referred to a commonly used term by lenders when they have to deal with underwriting loans for income-generating properties. How it is calculated? You need to divide the NOI (see below) by the total debt. If the ratios is 1.20 or higher, this is considered the average.

5. NOI

Initials for: Net Operating Income, this is the income left over from your rentals after paying all your monthly operating expenses. So, deduct your expenses from your GOI (Gross Operating Income) to get you the property’s NOI. For example, if you take in $20,000 in leases on all the units you have and spent $6,000 on maintenance including supplies, accounting, taxes, insurance, utilities and more, the NOI for the month was $2,000.

If you felt this information was useful and want to learn more about real estate. You can go to our Official Website and see all the incredible ways we have to offer to invest in real estate.

Are you considering real estate investment?

Some people may think that real estate investing involves risks but it also means investment success. Sometimes, what is most important in real estate, before the location, is the person who you are dealing with. In real estate most people will offer you “no-money” down methods of how to become a millionaire in a short time, but you and me know that not everyone is being honest.

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If you are considering to invest in real estate property, you are going to need:

• Investment capital (of course)
• Knowledge of the real estate market and the neighborhood where the property is.
• Great administration and negotiating skills
• The ability to do repair work (it is easier than you think)

If you are not able to look for foreclosure houses, you will have to serve as a landlord for the property while it increases in value. When you rent your property you have to be very careful because the property must be well-maintained.

When talking about real estate investing, we are talking about having some money to make money, and for that you need available capital. This is why a lot of people go into real estate after coming into a sizable amount of money.

Another important thing to do is to research your location. You can start attending local town board meetings, do some research in libraries and go on the Internet to look for some data about the location today and the upcoming years.

Then you need to know about the REITs — Real Estate Investment Trusts. This is a way of investing in real estate for a lot less money and you don’t have to worry about fixing a tenant’s leaking bathroom pipes in the middle of the night.

REITS invest in many companies involved in real estate, ranging from industrial parks to shopping centers to construction companies. They work the same way as mutual funds, except they set up a diversified portfolio that deals only in real estate.

REITS have high and low periods, like: stocks, bonds and mutual funds, they can be strong investments over time and pay dividends. They are fairly liquid and are a much safer way of investing in real estate than buying property.