How Successful Investors Prepare Their Real Estate Analysis

Successful real estate investors never rely simply on what others tell them. Once a prospective real estate investment has been located, prudent investors conduct a close examination of the rental property’s income, expenses, cash flow, rates of return, and profitability. Regardless what overzealous agents or sellers say, vigilant real estate investing demands a validation of the numbers.

To achieve this, real estate investors rely on a variety of reports and rates of return to measure an income property’s financial performance. And in this article, we’ll consider a few of these reports and financial measures.

Reports

The most popular report used in real estate investing circles is perhaps the Annual Property Operating Data, or APOD. This is because an APOD gives the real estate analyst a quick evaluation or “snapshot” of property performance during the first year of ownership. It does not consider tax shelter, but an APOD created correctly can serve as the real estate equivalent of an annual income and expense statement.

A Proforma Income Statement is also popular amongst analysts. Although comprised of speculated numbers, a proforma provides a useful way for real estate investors and analysts to evaluate an investment property’s future, long-term cash flow, performance. Proformas regularly project numbers out over a period of ten to twenty years.

Certainly one of the most important documents for a real estate analysis is the Rent Roll. This is because a property’s sources of income and income stream are vital to making wise real estate investment decisions. A rent roll typically lists currently occupied units with current rents along with vacant units and market rents. During the due diligence, of course, rents shown in the rent roll should be confirmed by the tenants.

Rates of Return

Capitalization rate, or cap rate, is one of the more popular rates of return used by real estate analysts. This is because cap rate offers a quick first-glance look at a property’s ability to pay its own way by expressing the relationship between a property’s value and its net operating income. Cap rate also provides real estate investors with an easy method for comparing similar properties.

Cash-on-cash return measures the ratio between a property’s anticipated first-year cash flow to the amount of investment required to purchase the property. Though cash on cash return does not account for the time value of money or for cash flows beyond the first year, this shortcoming is often overlooked because it does provide an easy way for real estate investors to compare the profitability of similar income-producing properties and investment opportunities quickly.

Internal rate of return is more complex because it requires a computation for time value of money and therefore requires a financial calculator or good real estate investment software. Nonetheless, it is widely-used by analysts because internal rate of return reveals in mathematical terms what a real estate investor’s initial cash investment will yield based on an expected stream of future cash flows discounted to equal today’s dollars. In other words, internal rate of return converts tomorrow’s dollars to today’s dollars and then computes your return on investment.

Here’s the point.

Take the time to conduct a thorough real estate analysis. Create the reports and returns and hold the numbers up to the light. This is the only reasonably certain way of making the right investment decision on any prospective real estate investment. If you do your real estate analysis correctly you’ll know whether the investment makes good financial sense or not, and almost certainly guarantee your real estate investing success.

Small Business Tax Advice How to Save on Your Tax With a Home Based Business

Want some helpful small business tax advice? Did you know that your Uncle Sam will actually pay you to start a home based business? That’s right, Congress has approved over 100 tax benefits that are available ONLY to home based business owners. These deductions, found in the Federal Tax Code, are 100% legal and 100% audit proof.Before we look at a few of these deductions and how much money this small business tax advice can put in your pocket, let’s look at how much is actually left out of your paycheck. While you know it is not as much as you would like, do you realize how much of your income goes to taxes? When you add up federal, state, country, gas, property, social security, unemployment, etc. the total comes to about 45%. By the time you pay your monthly housing, healthcare, food and transportation costs, you are left with about 20% to pay all others expenses and to enjoy life.Not a pretty picture. Fortunately, you can change that picture with a home based business. I can hear you saying; “I don’t have time for a home business I barely have time for my family and friends now.” And besides, you’re thinking, I certainly don’t have the time or desire to go to meetings or presentations to learn how to start-up and run a home based business. Probably, at one time or another you and your friends have discussed small business ideas that you might pursue.Now’s the time to stop talking and to take action to change your future. Are you on Facebook? Do you have a Twitter account? Do you use Youtube? Ever considered starting a Blog? If you answered yes to one or more of those questions I can show you how to turn these tools into a home business.Aside from the money you will make with a home based business, here are 5 significant tax breaks that can put $300-$500/month in your pocket.1. Home Office Deduction (Renters too; includes a percentage for utilities, maintenance, ins.)2. Business Use of Personal Vehicle ($1 for every 2 miles plus more)3. Hire your children (even as young as 6; big tax savings)4. Healthcare Costs (100% of out-of-pocket costs)5. Business Travel & EntertainmentMore good small business tax advice, there are only two qualifiers to be able to take advantages of the above deductions as well as over 100 others. Here’s what they are:1. Operate your business on a regular and consistent basis (the tax courts have defined this as 3-4 hours a week)2. Have an intent to make a profit.More good news; you can start your home business part-time while you continue with your present position. The Internet has changed the way we communicate, buy things and it can change the way you make the money you need to live the lifestyle you want.To learn more about the tax savings available to home based business owners, click on Resources on the right hand side of the page and watch the 5 minute video by Dr. Ron Mueller, Home Business Tax Law Expert. And, of course, contact me so I can give you further details.By the way, does saving $5,000 a year or more on your taxes appeal to you?How to Save on your Tax with a Home Based Business

5 Tools For Your Home Based Business Ideas

All the top home based businesses use the technology of the internet. We live in the digital age of emails, downloads, streaming data and mobile technology. If your home based business ideas do not include having an online presence, then you’re missing out on a worldwide market who can buy from you at any time of the day or night.Any legitimate home based business will need some investment to get it started and an online home business is no different. The good news is that the start up costs for a home based online business are considerably less than a traditional offline venture.Five Tools For Your Home Based Business.1. Domain Name.A domain name is the name of your website. It’s where your customers can find you online with an easy to use word, or sets of words. Your first option should always be to opt for a.com name when looking for domain name ideas for your home business as it is the universally accepted business domain extension.2. Website Hosting.Once you have your domain name, you’ll need somewhere to “rent” space for your website so that it can be live on the internet. Some domain registrars usually also provide hosting but do check the rates first. Once you have your domain and hosting sorted, you are well on your way to making your home based business ideas into a reality.3. Website.The WordPress website system is the most widely used website building platform on the internet. It has the functionality to help your home business earn online revenue as well providing a complete content management system. WordPress websites are reportedly used by such organisations as the New York Times, Ford, NASA, Pepsi and eBay. If it is good enough for them, then it will surely be good enough for your work from home based business ideas.4. Autoresponder.One of the best online business tools you can have is an autoresponder. Your autoresponder is the ‘salesman’ who works for you 24/7 – every day of the year. Autoresponder services are used to provide your leads with follow up information about your products and services via email. Remember that statistically, a prospect needs to see or hear your marketing message at least seven times before they take any action and buy from you.5. Continuous Education.It can be a frustrating process getting your home based business ideas from concept to reality. When you get stuck on a problem, you can lose focus and direction and that’s when they are most likely to give up. For example, getting a domain name and website hosting organised can seem a little complicated if you’ve never done it before. With ongoing business education, you can learn as you earn and draw on the experience of others for a fast-track to success.