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.

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How to obtain your first investment property

When talking about real estate we notice it is a very complicated subject. The problem is that it is very capital concentrated, especially for those who don’t have assets. The truth is that buying a good rental property is hard, but it is also possible.

Steps to acquire an investment property

Step 1: Learn and study everything about real estate

This is the toughest part but if you want to be successful you need to learn how real estate actually works. Read books, even if you only understand half of it, keep working through it and eventually you will understood most of it. If you don’t know a term google it but try a way to learn everything you can.

You will see that the beautiful thing about real estate is that there are different ways to make money (investing, brokering, research, tech, appraisals, renovations, etc.). That is real estate is a huge driver for the US and global economy.

Step 2: Commit yourself to own real estate

This is vital in the process. Not everybody comes from a wealthy family but that doesn´t mean you can own something, to be able to buy properties you have to be committed.

Embrace the fight, use it as motivation. If you are really committed, you will get it done.

Step 3: Develop a strategy

An attainable strategy for most people is to buy a single-family house with an investor and rent it out for income and price appreciation. This is just to start. Focus just on achievable goals.  Your strategy is to have goods that will cash flow. By the end of the year, the outlay must be less than what the property brings.

First, find a property: Go to Fci Exhange or other listing site and look what is on the market. Once you find a deal, make an offer.

Step 4: Find an investor

How? Well, talk about your goal to buy real estate. It can be seen as arrogant or even taboo, but this really works. You need to sound and look smart when talking about real estate and have a plan, people need to see that it works.

Final step: stay persistent

This step-by-step process is simple. You need to be patient in this business, you will have difficulties, bad tenants, renovation but don’t freak out and never quit.

The strategy to building this kind of longterm wealth is having interest work for you, not against you and buying rental property is the most achievable way to do this.

 

Ways to Succeed in Real Estate

If you are considering the idea about becoming a real estate investor you need to make sure to do your homework before jumping right in. Real estate investing can be enormously lucrative for those who approach it in the right way and learn how to stay ahead of the competition.

Step 1: Get Your Finances in Order

You need to have all your personal finances in order before making the first step to entering the real estate market, you need to consider this: while many investors see very lucrative returns from real estate transactions, you won’t receive those amounts of money  if you don’t have a required a solid plan and patience. Don’t underestimate or neglect to figure out all of the possible expenses that come along with buying property, such as renovations, utilities, maintenance, legal fees, etc. If you’ve decided to become an investor but don’t have resources stashed away to pay cash outright, you’ll have to consider financing options as well.

Step 2: Define your Role

There are diverse roles that investors can play in the market. Some select to be landlords and others buy exclusively to restore and resell. Knowing which type you prefer to be from the beginning will help narrow down the selection of properties in your local market to match your specific investment approach. It also it is about how much time they actually want to put into their real estate.

Step 3: Study the Market

Most successful real estate investors put an effort to study the location they do business in and know its history, neighborhoods, schools, transportation and planned developments like the back of their hand. They compare current prices in an area to understand where the demand for the property is as well as helps you to begin to distinguish fair from overpriced properties.

Step 4: Think Outside the Box

Finally, to be as efficient and successful as possible, there are numerous options to choose from, while you’re looking in your most desired locations, keep an eye out for signs of a developing area nearby. New construction can mean big returns if you get in on the ground floor of something that’s about to be a booming community.

Investing in real estate can be just as fun and exciting as it is profitable. Use your connections and local resources as much as possible to find your niche in the business.

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