The Capitalization Rate (also known as “Cap Rate”) is used to compare an income property with other similar income properties. It can also be used to place a value on a property based on the income it generates.
The Cap Rate merely represents the projected return for one year as if the property was bought with all cash. But since we don't normally buy property using all cash we would use other measures, such as the cash-on-cash return, to evaluate a property's financial performance.
One of our blog readers submitted the following question:
“I have a home that was appraised at $130,000 this month. However, I think it's worth at least $200,000. Would you agree to keep it until the market comes back up and try to sell then? My ex-husband will rent it from me until then. Thanks, Bev”
Well Bev, there are several things to consider: [Read more…]
Most experts agree that the days of flipping properties are over. With weak demand, slow sales and high inventory in most US markets, the question real estate investors are asking is, “Where do I invest now?”
As always, there are markets around the country where homes are affordable, the underlying economy is strong, and appreciation is imminent. These are the markets you should consider looking at for your next long-term real estate investment. [Read more…]
With falling prices and rising inventories, investors are finding themselves in the best buying position in almost a decade.
A recent polls by Reuters/Zogby tells us that it’s a good time to buy. And another poll by Associated Press and AOL also reveals that it’s a good time to buy but 60% of those polled won't buy any real estate within the next two years.
The disparity is probably due to economic fears which are causing consumers to tighten their purse strings. The Reuters/Zogby poll said that nearly 75% of American’s believe the economy is in a recession right now, and almost 50% rated their personal financial situation as negative.
The AP/AOL poll said that nearly 14% of mortgage holders fear they will miss a mortgage payment soon. And 30% said they are concerned their home’s value will decrease within the next two years.
The important thing to remember is that you should stay focused on your local neighborhood and those of your real estate investments. Remember that real estate is primarily driven by local economic factors such as jobs, housing inventory, and supply and demand.
There is no human invention more complex than the tax codes, and among the most complicated are the laws surrounding real estate investing. So, what follows is NOT to be considered legal advice — consult your attorney or tax accountant before making any decisions.
Well, now that the rear is covered, what considerations should the real estate investor keep in mind? Since laws vary between countries, and between states within the U.S., any general advice would be worthless. But here are some particulars that apply in many areas. [Read more…]
