A firm foundation of finance, valuations, and calculations is mandatory for successful real estate investing. Anyone who has had real estate investment success has had to rely on their understanding of the essential components of value such as how to calculate cash flow, income taxes, market forces including real estate comp information, financing, and investment yield to make it with investment real estate. Three most important components are: Finance, Valuation and Calculations.
Since most investors finance a major portion of the purchase price, you need to understand is that your real cost is not the sale of the property but the total you pay over many years. InvestorCompsOnline can provide you with real estate comps information to give you an estimate of what your potential ROI(return on investment) will be. And this is one of the most important questions investors ask because investors need to know how much their investments require in capital. For example, if you purchase a rental property for $300,000, put $90,000 down, and finance the balance of $210,000 for 30 years at 7.5% you would wind up paying a whole lot more in interest than you would with a similar loan at a 6.0% interest rate. In other words, at the end of the day, it could be a mistake if you focus mainly on the price of a property with little regard for the best mortgage deal and the results of compound interest.
Please watch for my next blog where valuation will be discussed and how it is important to focus on your local trends!