Roberta Nopson with RE/MAX Equity Group: Learn the basics of real estate investment.

There may not be a better time than now to invest in real estate. Vacant inventory, bank owned inventory and many buyers priced out of the 'financial' picture to purchase. Enter the Real Estate Investor.

"Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price. Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors." -- Warren Buffett, "Buy American. I Am" - New York Times - 10/16/2008

Back to the basics ~

The basis of choosing a property is, location, location, location, AND the potential investment return generated from rental income (net of all rental-related expenses).

Capitalization Rate Computation

This formula provides the basic evaluation tool to determine the investment value of a given piece of property. Though some investors in the past like to use Gross Rent Multiplier (GRM), this is a more effective indicator of the true investment value.

Capitalization Rate (Cap Rate) = Net Operating Income (NOI) / Selling Price

NOI = Annual Gross Rent – Total Expenses (including property taxes but excluding debt services)

Example:

If the selling price of a property is $400,000 and the NOI is $30,000

The capitalization rate = $30,000 / $400,000 = 7.5%

7.5% is then the expected rate of investment return from the property.

Note ~ to get the true CAP rate of your real estate investment, you need to get the actual current annual rent, NOT the projected rental income.

Food for thought ~ while some brokers may encourage you to use the projected income. I discourage this concept. You're buying the property at today's dollar, not a projected amount. Don’t spend what you have not yet earned to measure against monies you have to pay today!

Call me today to discuss your real estate investment goals. I'm happy to help you identify potential Portland area and Oregon investment property to enhance your portfolio.

Disclaimer: All information deemed reliable but not guaranteed. All properties are subject to prior sale, change or withdrawal. Neither listing broker(s) or information provider(s) shall be responsible for any typographical errors, misinformation, misprints and shall be held totally harmless. Listing(s) information is provided for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Information on this site was last updated 02/05/2012. The listing information on this page last changed on 02/05/2012. The data relating to real estate for sale on this website comes in part from the Internet Data Exchange program of RMLS (last updated Sat 02/04/2012 9:15:23 PM EST) or Willamette Valley MLS (last updated Sat 02/04/2012 3:48:13 PM EST). Real estate listings held by brokerage firms other than RE/MAX Equity Group may be marked with the Internet Data Exchange logo and detailed information about those properties will include the name of the listing broker(s) when required by the MLS. All rights reserved. --

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