Brooks Real Estate Investing: To assist potential investors to assess domestic and global real estate and develop long-term wealth, Brooks describes eight steps:
- Get educated based on your desired property –Before investing in real estate, it is very important to select the type of property and set goals. And then learn about your preferred property, which can include residential, rental properties, multi-family homes, sustainable agriculture, and/or land.
- Find the Right Advisor –Finding the right real estate investment advisor is a very personal decision. First, there must be a like-minded mindset for both the advisor and the investor. For example, does one believe in both good debt and bad debt, or does one “debt-free” want to invest with only cash?
- Look for Multiple Sources of Income –When valuing a rental property or real estate investment, look for multiple streams of income. At least two sources of income are recommended, which may include cash flow, equity in purchases, and/or forced appreciation. If multiple sources of income aren’t possible, consider moving on to the next potential deal.
- Assess Appreciation Options – To enhance the value of an investment property, there are three types of appreciation, which include: market appreciation, rent appreciation, and forced appreciation. Forced appreciation occurs when the investor inflates the value of the asset in several ways. A pre-construction opportunity and/or buying a single-family home that can be converted into a duplex are the only two options.
- Evaluate Cash Flow Income Options – To evaluate the cash flow in a property, consider potential income from short-term or long-term renters. In addition, investors can increase cash flow by increasing rents, charging pet rents, adding additional fees for parking, and/or higher rents for a specific market such as medical housing or corporate housing.
- Consider using OPM (Other People’s Money) – OPM can help increase investment faster. There are many options for using your own money versus other people’s money. For example, you can borrow money from a bank, find investors who want guaranteed returns, and/or use developer financing, a more popular option for global investing.
- Consider Investing Your 401Kor IRA –Knowing how to use IRA or 401k savings is important. For example, the money must first go into a self-directed IRA. There are several rules for these investments, which can be done without penalty with proper advice.
- Look for Multiple Exit Strategies– When investing in real estate, define multiple exit strategies with plans A, B, and C. If the intended exit strategy does not go according to plan, fall back on the next strategy. For example, if the property is located near a major hospital in Panama City, Panama with international business locations such as Hospital Pacific Salud, an affiliate of Johns Hopkins Medicine International, plan for this niche market.
Plan A can be one where the investor buys units to be used for medical tourism where there is already a plan in place with the hospital, medical professionals, and the management company.
In Plan B, investors can rent out their units to medical staff while building equity. And then if investors want higher ROI, Plan C can rent out corporate housing to nearby MNCs to increase cash flow for employees.
And in all cases, investors who have financed their investment can usually sell it for a higher price, especially if involved in a pre-construction stage of development.
Rent yield in Brooks Real Estate Investing is an important parameter to compare properties and their locations against each other. They also reflect the rate of return from the investment.
Real estate agents and rental property sellers often rely on rental yield analysis to judge a property. Knowing a property’s net rental yield is important before investing, as it provides information on how much money to set aside for property maintenance and other expenses. So you can plan.
Accurate calculation of a property’s rental yield lays the foundation for a successful rental property investment strategy.
When the value of an asset increases over time, it is known as ‘capital growth’ or capital appreciation. The value of the property is not fixed. This may increase or decrease depending on several factors, including the local conditions surrounding the property.
Rental income is what the tenant pays you. Hiring is not just about the rent received. You also need to budget for certain expenses and related costs as the property is owned by you. Therefore, in both cases, one must chart the expected costs for the property – whether occupied or vacant.
Purchase Price vs. Current Valuation
The rental yield can be expressed either as a percentage of the purchase price or as a current valuation.
The yield calculated with the current gross rent and the original purchase price indicates the rise/fall in rent since purchase.
The current gross rent and yield calculated with the current appraisal allow you to monitor many aspects of your investment property.
To get an accurate indication of the current yield in an area, start with the current valuation of your property in the area and other similar properties in the area, and also get the current rent prices in those properties. You can then use this data to determine whether you are charging more or less rent on your property.
Cash flow positive
Yield is often used as a quick measure of how likely an asset is to be cash-flow positive.
Broadly explained, if the rental yield is 2-3% higher than the prevailing interest rates, the property is likely to be cash-flow positive. However, it depends on a lot of factors and assumptions that need to be studied in detail.
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