Financing Archives - Norada Real Estate Funding

How to Calculate Net Operating Income

October 24, 2020 by Marco Santarelli

You can calculate net operating income (NOI) for your real estate investment by using the generally accepted net operating income formula, which is your potential rental income plus any additional property-related income minus vacancy losses minus total operating expenses.

Keep in mind the net operating income formula can vary depending on who calculates it.

For example, most investors separate potential rental income and other income, but sometimes you will see them combined. Regardless, the generally accepted net operating income formula is your potential rental income plus any additional property-related income minus vacancy losses minus total operating expenses.

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Cap Rate Calculation: How To Use Cap Rate In Real Estate?

October 12, 2020 by Marco Santarelli

Capitalization Rate or Cap Rate is a term often thrown around in real estate discussions. Yet many people don't really understand what it means. After all, it can be confused with cash-on-cash returns and the rate of return. Here's what you need to know about the cap rate, from its actual definition to methods to cap rate calculation methods.

What Is The Capitalization Rate?

The capitalization rate is similar to the rate of return on investment. It allows you to compare the relative value of real estate investments independent of their dollar value. The standard cap rate formula is net operating income divided by the market value. This metric is one of the most important calculations done by real estate investors. The cap rate is ideal for evaluating comparable properties in the same market area.

The cap rate calculator (short for capitalization rate) is a useful tool as it allows you to quickly get an estimate for how much money the property is expected to make, and how this compares to similar properties in the area.

Cap Rate Calculation Example

Now that you know the basic equations used to calculate the cap rate, below is an example to better illustrate how this is used. First, let’s find our values.

Property Value: $250,000
Total Revenue: Four units x $1,000/month in rent = $48,000/year

Total Expenses:

Property manager salary – $20,000
Cleaning and maintenance – $10,000
Inspection and broker fees – $5,000

Next, let’s calculate NOI. $48,000 (revenue) – $35,000 (expenses) = $13,000. Lastly, we can use this number to calculate the cap rate of the property. $13,000 (NOI)/$250,000 (property value) = .052, or 5.2% cap rate.

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1031 Exchange Rules For Investors: How To Do A 1031 Exchange In 2020?

August 28, 2020 by Marco Santarelli

Taxes rarely make for exciting reading material, but if you own an investment property, there’s at least one set of IRS regulations you absolutely will want to understand: 1031 exchange rules. Why? Because normally when you sell an investment property for more than what you paid for it, you’d have to pay a hefty capital gains tax. But with a 1031 exchange, you get to defer paying those taxes if you reinvest the proceeds in a new property, making an “exchange” rather than a sale. It’s just that this transaction is subject to some strict regulations, so you’ll need to follow the 1031 exchange rules to the letter. There are many investors who would like to do a 1031 exchange. Some of them who do fix and flip call us for a 1031 exchange to roll the gain over into the next property. But can they? Although confusing, understanding IRS Code Section 1031 is worth it. Here’s what you need to know to pull it off.

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What Are Real Estate Mortgage Notes And How To Invest?

June 28, 2020 by Marco Santarelli

One of the best real estate investment opportunities available is also one of those that’s rarely discussed: mortgage note investing. Mortgage notes are also known as real estate lien notes and borrower’s notes. They have become a popular asset class over the past few years. Investing in mortgage notes has many benefits such as — rates of return that are higher than the bank's traditional low yield bonds; and higher than most stock dividends. Let's first discuss the meaning of a mortgage note. A real estate mortgage note is a promissory note secured by a mortgage loan.

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Best Ways To Consolidate Your Debts In The Crisis of Coronavirus 2020

June 13, 2020 by Marco Santarelli

Debt consolidation means getting a new loan to pay off all your debts through a single payment plan. With the help of debt consolidation, you can also pay off multiple unsecured loans from credit cards, medical bills, personal loans, payday loans, etc. A Debt Consolidation Loan can be an effective way to manage your finances in 2020. You can roll multiple debts into a single payment, ideally with a lower interest rate. It is like refinancing your mortgage – you take a big loan and then pay off all your previous unsecured loans.