1501 Botany Living After

Real Estate Education

Real Estate can be confusing sometimes, we at Turn-Key CLE pride ourselves in knowing our clients make the most educated decisions possible. And when things start to get confusing its always nice to know where your resources are.

Basic Real Estate Terminology

Cash - On - Cash
Cash-On-Cash is a term short for cash-on-cash return on investment, that is used to describe a return one investment for properties that generate lease income. The amount of net income that is received from the cash that is initially invested. A Cash-On-Cash analysis is often a cash return that is higher than a return calculated using the reported margin of profit.
Depreciation
Depreciation is the decrease in value that an asset has over time due to age, wear and tear, or bad market conditions. Depreciation is the percentage of an asset that was used during a period based on the anticipated life the asset with normal use has. Depreciation is allowable to claim as an expense every year for each class of asset. The original basis of the asset will be multiplied by the percentage to calculate the amount of depreciation to expense every year that the asset is held by a qualified owner. The actual life of a building may be longer than the allowable depreciable life. Depreciation of a property used as an expense can reduce the taxable income of the investment. The accumulated depreciation can also be subtracted from the original basis of a property to calculate the current basis of a property. A lower basis increases the taxable income on the sale of the investment property.
Assets Under Management
Assets Under Management is a term used to describe the market value of financial assets or investments that an investment firm manages on behalf of their investors. It is used as a measure of success against competitors, the volume of Assets Under Management can be directly influenced by cash inflows, outflows and capital appreciation. Most of these investments are have advantages for reduced tax liability with capital gains and other attributes of real estate ownership versus other forms of income.
Gross Potential Rent
The overall income that a real estate investor expects to collect from the purchased property based on the current rent. In order to determine this, you calculate the total rent as if all units were occupied and the tenants make payments for rent. This is just a way for determining the possible rental revenue of the investment property, including the market rental value of any unit that is vacant. When an investor makes the decision to purchase a property, they pay what we consider a flat purchase price. Using this investors are able to better predict the profitability of that particular investment property.
Cap Rate
This is also known as the capitalization rate and is used to estimate the rate of return on an investment property. This is found by taking the net income a property potentially would make divided by the net operating income by the properties asset value written in percentage form. This rate is used to compare properties of relative value and to determine the exit rate.
Net Income
Also known as Net Operating Income is the total earnings after taxes and other operating expenses have been deducted. Operational expenses include repairs, salaries, municipal taxes, utilities, and depreciation, all of which are subtracted from gross income. Calculating the net income uses the taxes paid by corporations and owner distributions. Net Income is the taxable amount and the deduction of depreciation as a non-cash expense. In most cases net cash (ex. tenant rent) is typically more than the Net Income. Income statements on larger investment properties start with the total gross income that the property would generate with full occupancy. Interest paid on loans and owner distributions reduce the income from operations to calculate the pre tax income.
Annual Percentage Rate
The Annual Percentage Rate is the yearly charge to a borrower on the annual cost of funds covering their mortgage, loan, or credit card that takes into account interest, insurance, and principal payment amounts. APR is also considered the cost of issued credit expressed as the annual percentage of that specified credit amount. The monthly percentage of APR can be determined by dividing the total Annual Percentage Rate by twelve months. The Annual Percentage Rate is used in most mortgages or credit agreements and can cover a variety of fees and costs that make up the structure of the interest rate in addition to the principal of the mortgage, loan, or investment. APR is all the costs and fees that will need to be paid back, this number is used to help compare.
Gross Equity Income
Gross Equity Income is the total value of all income, dividends, and rents from an asset over the time as well as the value of capital investments and contributions made by an investor before liabilities and depreciation have been calculated. The amount of unconsolidated earnings from the cash flow, principal reduction, and first year appreciation of a specified asset. Gross Equity Income does not take into account future appreciation as it is intended to show the value of money on an investment. Before all expenses are deducted, the amount should be an accurate assessment of an individual’s liquidity, then a deduction of liabilities, such as mortgage balance owed.
Liquidity
Liquidity is the ease and ability that an asset or security has to be converted into cash. Liquidity is measured as a ratio of the ability to turn assets to liabilities. Beyond knowing that there are enough liquid assets to pay current liabilities, a real estate investor’s focus should be on how to generate cash to grow the number and size of the total investment holdings.
Cash Flow
This is the flow of cash receipts, payments, vacancy rate, and revenue. When income is bigger than the expenses it is considered positive cash flow. When expenses are bigger than the income this is called negative cash flow.
2037-W-95th-St-Photo-9

Where to Begin?

Once you've found your ideal investment property, and the price has been decided and signed upon. After this a title search and a professional home inspection are done to make sure everything is in order. You should also get land lord insurance, you cant rent out houses without it. Eventually the title company will contact you to talk about closing and the rest. After that and all documents are signed and sent you will the proud owner of your new investment property! At this point now we are ready to work on the rehab part of the process.
4420-Bush-Ave-Up-Rear-11092023_143725 (1)

Our Rehab Process

After purchasing an investment property, the next step is the rehab process. This could potentially be already started or just starting (depending on the property). All renovations we do increase the value for the property, allowing for the most profitable return as possible. Sometimes something as small as a cosmetic update can increase your potential return.

Frequently Asked Questions

What's the average timeline for investing?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris eu massa orci.
What type of property do you recommend for beginner investors?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris eu massa orci.
Do you work with out of state investors?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris eu massa orci.
Why should I invest in Cleveland?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris eu massa orci.
How does property management work?
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris eu massa orci.

Additional Resources