High Profit Investing in Real Estate: Strategy Fundamentals

Strategy fundamentals of high profit investing in real estate can be summarized in the following points, based on the discussion in this chapter (this is an excerpt from the book Real Estate Investing for Double-Digit Returns by Petros S. Sivitanides, Ph.D.):

- Significant profits in real estate can be achieved if a property’s value increases considerably after its purchase, or if a property is bought considerably below its true market value.

- Property value increases can be triggered by increases in a property’s income and by declines in market capitalization rates.- Capitalization-rate declines can be triggered by strengthening local market conditions, which improve investor risk perceptions and appreciation expectations, as well as by decreases in interest rates and returns in alternative investment vehicles, such as stocks and bonds.

- Property-income increases can be triggered by macroeconomic factors, which influence the demand and supply for all property types or a specific property type, and by microeconomic and location-specific forces.

- The three crucial components of real estate investment decisions targeting high returns include appropriate timing, property type, and location. These need to be chosen in a way that will maximize the investor’s benefit from macroeconomic and locational forces expected to significantly boost property income and values.

- Properties with big profit potential can be classified into four broad categories depending on the source of the expected value growth:
1) properties with market-driven value-increase potential
2) properties with development-driven value-increase potential
3) mismanaged properties, and
4) bargain properties.

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Real Estate Investment Mathematics! Download all these formulas Now! Internal Rate of Return(IRR) The 3 Formulas for Modified IRR (MIRR)/Financial Management Rate of Return (FMRR) Potential Gross Income Multiplier (PGIM) Potential Gross Income Effective Gross Income Multiplier Effective Gross Income Net Income Multiplier Net Operating Income Overall Capitalization Rate/Income Return Capitalization Factor Band-of-Investment Formula for Estimating a Market/Required Capitalization Rate Theoretical-Approach Formula for Estimating a Market/Required Capitalization Rate Appreciation Return Total Return Return on Total Capital (ROR) Return on Equity (ROE)/Cash-on-Cash Return/Equity Dividend Rate Before Tax Equity Cash Flow (BTECF) Equity Investment Loan Amount Debt Service Mortgage Constant Payback Period Breakeven Occupancy After Tax Cash Flow (ATCF) Taxable Income One-Period IRR Income Tax Payment in Association with Income Producing Property Capital Gains Formula for Cash Flow for Last Period of Analysis Future Resale Price Annual Rental Income of Occupied Multi-Tenant Property Multi-Period Lease Rate Growth Formula with Intertemporally Variable CPI Forecast Multi-period Lease Rate Growth Formula with Constant CPI Forecast Present Value (PV) Net Present Value (NPV) Profitability Index And more …….

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