Never Invest In Real Estate Until You Understand This

Never invest in real estate until you understand the numbers that separate the deals that build wealth from the deals that quietly bleed you out. Here are 5 formulas every real investor should know before signing anything: NOI (Net Operating Income) = Revenue minus operating expenses. Not counting your mortgage. This is what the property actually earns before financing. If someone shows you a deal and can’t tell you the NOI immediately, walk away. Cap Rate = NOI divided by purchase price. This tells you the unlevered return of the property. A 7 cap means you’d earn 7% on your money if you bought it in cash. Higher cap generally means higher return but also higher risk or worse market. Cash-on-Cash Return = Annual cash flow after debt divided by cash you actually invested. This is the real number that matters once you’ve financed the deal. A property with a 6 cap can produce a 15% cash-on-cash return with the right leverage. DSCR (Debt Service Coverage Ratio) = NOI divided by annual debt payments. Lenders won’t lend below 1.20 on most commercial deals. Below 1.0 means the property doesn’t produce enough income to cover the loan. This is the number that keeps you from getting foreclosed. LTV (Loan to Value) = Loan amount divided by property value. Determines how much cash you have to put down and how exposed you are if the market corrects. Lower LTV means safer position, higher LTV means more leverage and more risk. If you don’t know these numbers cold, you’re not investing. You’re gambling with real money. #WakeupPrayHustle for your loved ones!! Follow the page where our goal is to create the wealthiest group of entrepreneurs, comment “Mentor” if you need help #business #entrepreneur #realestate #wealth