french property converter

I often evaluate properties for investment purposes for myself and for clients, and I have noticed that many people have no starting point for evaluating income objects properties. Based done for the years I have learned, discovered, and some large models can be learned from each.

Today we take a look at a model, I refer to the Real Estate Stack. This is the basis of measurement models, which an investor for the investment and convert it into a mathematical model so that it is in comparison with all other investment opportunities.

Too often I see "wanna-be" investors want to look at properties. Personally I never like to look at investment properties, until I had already seen the number of "potential. When the figures are not super attractive, then look at the real estate is not only a waste of time, but it also brings in the possibility of faulty decision-making by emotional attachment. I hate it "falling in love" with a property, if the numbers do not work, as well as an additional feature.

So, on the Real Estate Stack. This is the basis for the mathematical modeling of the investor to determine the Net Operating Income (NOI) of the property. All important terms in the model are outlined below:

Gross profit potential (GPI)

The gross profit potential of a property is simply the "best case", what they can, to let. If a property can be rented for $ 900 - $ 1,000 per month for the rent, the GPI would be $ 1,000 x 12 = $ 12,000 per year.

Vacancy and collection losses (V / C)

Vacancy is the measurement of time, expressed as a percentage of the year that you expect the property, no tenants. Each property has a period of vacancy by switching to tenants as well as market cycles, which are harder to find tenants.

Collection losses, as stated in the vacancy that no income arises, is if tenants are not paying the property and either need to be motivated or cleared. Again, this is expressed as a percentage per annum.

The key to the vacancy and collection losses is that different types of properties in different cycles. Maybe a house in the higher price range have more tenant occupied and thus a lower vacancy rates, whereas a property in a student dormitory area can be expected to almost every year, resulting in a higher vacancy. Using the correct figures for vacancy notification allows us to both of these characteristics and determine which is the better buy.

Effective gross income (EGI)

Effective gross income is the amount of revenue we expect every year, while the owner of the property. This is not the "best case scenario", but it is the "realistic" scenario.

Operating expenses (OE)

Operating expenses are the things that the owner will be charged, while the owner of the property. These costs could be property taxes, insurance, maintenance fees, management fees, homeowners association costs, utilities, and reserves for replacements (roofs, HVAC systems, etc.).

Net Operating Income (NOI)

The NOI is the amount of money that would apply to all investors for all revenue and payment of all costs, with the exception of payments for loans and taxes. The NOI is important because it affects the investment in property that is purchased for cash-flow equivalent.
Annual Debt Service (ADS)

This is the sum of mortgage payments for the year. The annual debt service includes principal and interest portion of payments for all twelve months.

Cash flow before taxes (CFBT)

Cash flow before taxes is the amount of money by the investor for the year, whether positive or negative, before taxes are taken into account.

The Real Estate Stack
PGI
- V / c
EGI
- OE
NOI
- ADS
CFAT


So there is the simple property stack. Try it out. Use it with different properties to determine which investments will be better. If you do the math, the money will follow!

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