Whenever an individual places surplus
funds in the bank or stocks, or purchases real estate for speculation,
this individual has made an investment.
Investment Real Estate can be land, shopping
centers, office buildings, warehouses, multi-family apartments, and rental
houses except an investors personal resident or second home.
Why do people invest*?
Here are few good reasons:
· To generate additional
· To acquire wealth for their retirement
· To accumulate for their children's
· To acquire prestige in the community
· To create an estate for their
· To obtain financial independence
There are 4 major advantages
of having investment real estate*:
1. Income from Cash Flow
2. Equity from Loan Pay Down
3. Equity from Appreciation
4. Tax Savings
Here are few terminology's you
must know as investor:
· Gross Scheduled Income
(GSI)- This is the expected total rent as if the property is 100% occupied
for the year.
· Effective Rental Income-
It represents the actual money collected in rents for the year. It
is obtained by subtracting vacancy and uncollected rents from Gross Scheduled
· Gross Operating Income (GOI)-
Total actual income received from the property operations. It is
obtained by adding other incomes (laundry, application fees, storage fees,
vending machine income, etc.) to Effective Rental Income.
· Annual Operating Expenses-
The costs required in running the property. (Property Tax, Insurance,
Utilities, Maintenance, Services, etc)
· Net Operating Income (NOI)-
This is the actual money you will get from the property. This is
obtained by subtracting Annual Operating Expenses from Gross Operating