Get the full show notes at www.firewithouttheburn.com/podcastSummary:

* Real estate investing from afar

* Analyzing properties - rules of thumb and detailed analysis

* Evaluate the property separately from the financing

Rules of Thumb1% Rule

* The gross monthly rents should be at least 1% of the purchase price

* If you have a $100,000 property, it needs to rent for at least $1,000

per month

50% rule

* Roughly 50% of the gross rents will go towards operating expenses and

the remaining 50% will be available as cashflow

* If gross rents are $1,000/month, you can expect about $500 in

cashflow

* This does NOT account for financing costs or debt service

CAP Rate

* This is your return on investment assuming a cash purchase (no

financing)

* It is calculated by taking your annual net operating income (gross

rents minus all expenses but NOT debt service) and dividing that by

the purchase price

* My monthly net operating income is about $325, multiplied by 12 is

$3,900 annually. The purchase price of the property is $56,900.

$3,900/$56,900 = 6.9% return

Cash-on-cash return

* This is your after-financing actual return on investment

* This is calculated by taking your annual net operating income,

subtracting your debt payments, and dividing that number by the

amount of cash you invested (down payment).

* We didn’t calculate this for my property, but here is an example:

o Monthly gross rents are $1,000 ($12,000 annually)

o Monthly expenses are $600 (7,200 annually)

o Net operating income is $400/month or $4,800 per year

o If the mortgage is $300/month, that leaves you a net cashflow

of $100/month or $1,200 per year

o If your downpayment was $10,000, your COCR is $1,200/$10,000 =

12%