All Forum Posts by: Edward Damhuis

I purchased my single family home a couple of years ago and since have it rented out. I use a property manager so that is an added expense but he has been a god send to this point. My issue is, that I have run all of the exact numbers using the rental property calculator to analyze my house. The numbers don't add up. My actual cashflow is barely $100 and it would be negative if I were to factor in all additional costs(i.e. CapEX, Vacancy, Maintenance costs) other than my property manager. The calculator is showing that after all of those items factored in I should still have a cashflow of $250+. Again, I have used all actual numbers from my bank statements/end of year tax docs, and triple checked that I was putting all the numbers in the right blocks using the calculator, and the numbers don't add up... I'm a bit discouraged. The only other variable factor would be that I used a VA loan. Obviously thats quite a difference from a traditional or FHA loan but from the research I have done it shouldn't be costing me more money, especially since I took the actual loan amount and typed that into the calculator. Does anyone have any thoughts or suggestions?

Ohhhhhh I see, now that makes sense. Thank you! When worded like that it all comes together. The cap rate is how much you are paying for a NOI... its a ratio of how much you would paid for how much you'll make. Please tell me that's correct...

Wow, that was a lot to chew on.  lol.  I'm glad I asked though; looks like there may have been confusion for some, myself included. 

However to summarize; correct me if I'm wrong, as I'm sure you all will... lol. 

A "cap rate" is a number(%) calculated for a property based on a variety of things that are actual(like current NOI) and also based on things that are projected(property value/current trends for a given area), the purpose of the "cap rate" is to show what the seller is anticipating the return to be, with as much of an educated guess as possible. Showing how good of an investment/risk it is if someone were to purchase it...

Fair enough..?  A easy question with an, as complicated as you want to give, answer.

Thank you Oren Karp!!! That helps a lot! Thank you to everybody who commented, I'm still learning everything I can and you all have been very helpful!

Russell Brazil ... I understand the math, and the explanation of what it is... I guess I'm having a harder time understanding it's purpose. So a seller uses a cap rate to charge more for a property? Other than what the number tells you, how else does it factor into a purchase? Maybe that's more my question. Thank you for the help!

I know what the definition of a cap rate is but for some reason it's not sinking in. Can someone please elaborate just a tad for me?

@Josh Autery That makes sense.  I'm more interested in the knowledge about all the processes involved rather than the license itself.  With that being said, which would be the best route to take to further my education?  I've been reading my eyes off for the last couple weeks and I'm learning a lot.  I feel like there should be a more comprehensive way to do it.

@Kerry Baird When you say up to 4 units, you are referring to a fourplex, correct? 

@Josh Autery I am looking to become an agent as well, on the side.  Any pointers for courses or schools in the area or online?

Hi BP!  I'm rather new to the real estate investment game!  Currently, the only experience I have is in a few good books, and my single family home that I converted from my residence to an investment property.  I couldn't be more excited about the possibilities to come!  I have high hopes, a lot of interest, very few liabilities and a reasonably large income to work with!  The home that I own is in Bellevue, NE.  I was stationed there for a few years when I was in the Air Force.  I am now looking to broaden my rental property investments in areas near military installations.  Along the way I want to learn as much as I can to be able make this "side job" my primary source of income, carrying me to bigger and better things!