Three Questions to Ask Before You Invest in Real Estate

It’s important to ask these three questions when you invest in real estate:

  1. How can I increase my rate of return?  The cornerstone of any smart investment strategy is to calculate your rate of return.  With real estate this is done by running the numbers using an internal rate of return (IRR) formula that takes into account:
    • Present Value (PV) – what am I paying out of pocket to get into this investment?
    • Term (N) – what’s my timeline and how long am I going to hold this investment?
    • Periodic Cash Flow (PMT) – what’s my monthly cash flow?
    • Future Value (FV) – what are my net proceeds (after expenses) when I sell the investment?
  2. How does my rate of return with real estate compare with other investment opportunities?  When calculating your rate of return, make sure to account for:
    • Carrying costs (mortgage, taxes, insurance, maintenance, etc.)
    • Your time spent managing the property
    • Vacancy loss if you don’t find a tenant
  3. How can I reduce my risk?  You may want to consider these strategies to reduce your investment risk:
    • Increase your liability insurance in case something goes wrong
    • Consider a rent-to-own strategy where you find a tenant before you find a property
    • Consider mortgage strategies that result in more cash flow and/or better liquidity

Contact me so we can get started on helping you answer these questions!

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5 Myths About Real Estate Reality TV Explained

5 Myths About Real Estate Reality TV Explained | MyKCM

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there… watching entire seasons of “Love it or List it,” “Fixer Upper,” “House Hunters,” “Property Brothers,” and so many more, just in one sitting.

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and make a decision to purchase one of them.

Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtorsthe average homebuyer tours 10 homes as a part of their search. 

Myth #2: The houses the buyers are touring are still for sale.

Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.

Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the Open House.

Truth: Of course this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but are only a PIECE of the overall marketing of your home. Just realize that many homes are sold during regular listing appointments as well.

Myth #5: Homeowners make a decision about selling their home after a 5-minute conversation.

Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!