One of the most ideal ways of investing your money is in the form of property. Aside from the high amount of gains, you will also have the chance to increase your net worth. But in choosing your very own property investment, it is very important for you to know its marketability. So, the best thing for you to do is to have tools that can calculate the value of your prospect property.
The following are just some of the efficient ways on how you can definitely calculate the Cap Rate and a comparison metric known as the Cash on Cash Return if you prefer home as an investment:
Of course, your first priority is to examine the property’s value. If your question is how, well you must need the help of a professional tax consultant, realtor, or home appraiser. Since they are experts, they can easily and correctly identify the value of your property.
The Annual Net Operating Income or (NOI) is also a very important and useful information with regard to calculating the value of your property. This is simply calculated by assuming the probable rental income from the certain property in a period of only 12 months. Next you have to subtract the costs related with the rental of the home for the 12-month period. These usual costs include management fees, property taxes, maintenance costs, insurance and expected repairs as well. Always bear in mind that the mortgage payments should not be included as portion of the cost because this is covered by the Capitalization Rate. This is used in comparing and contrasting properties with each other supposing that they are bought with cash because this certainly offers a more precise comparison.
In order for you to successfully calculate the Capitalization Rate, you have to simply divide the NOI or Annual Net Operating Income by the property’s market price. For you to understand it even more, this is the equation: Cap Rate= Annual NOI / Purchase Price (Market Price).
See? There are lots of ways on how you will be able to calculate the value of your prospect property investment. This simple property investment advice will serve as the key in order for you to have large profits.