The Renegade Real Estate Investing Newsletter
"Cutting Through the Real Estate Investing B.S."
This FREE Real Estate Investing Tips newsletter is your window
into the world of real estate investing. You will never get closer
to the real action than learning straight from two Canadian brothers,
Tom & Nick Karadza, who are actually implementing the strategies they
In this weekly publication you will get access to our real world guides,
trends, tips, strategies and "how to" information that is being implemented
"on the streets" with real people, right here in Canada.
To access the full list of articles visit: www.TheRealEstateRenegades.com or check out their new blog: Blog.TheRealEstateRenegades.com
It is published every Thursday, if you have been forwarded
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Friday September 12th, 2008
In this Issue:
- Renegade Commentary: The Greeks, Math, Real Estate & Nick
- Featured Article: "Net Operating Income & Capitalization Rates"
The Greeks, Math, Real Estate & Nick
With Nick traveling in Greece right now we thought we should keep on theme and discuss a little bit about Greeks and math and how it all relates to real estate!
Why not have a little fun right?
As many of you know Nick and I are products of a Croatian father and a Scottish mother who met at the Palais Royale Ballroom on Lakeshore Blvd in Toronto. It's a little bit of a landmark as far as dancing halls go in Toronto.
(And we think it's only possible in Toronto that a Croatian and a Scot would meet each other at a dance!)
As a result of such heritage we were shot gunned over to Croatia many times on summer break as kids. It's a great place and until recently undiscovered. Beautiful beaches on the Adriatic Sea. Just thinking about it is making me smile.
Croatia is sandwiched between Italy and Greece but we never made it over to Greece. Until now of course, Nick is probably having glass of red on a patio or marching up to the Acropolis as you read this!
A few Income for Life members just got back from Greece and a couple more are on there way! Greece is obviously a magnet for real estate investors ;)
The Greeks played a major role in mathematics, going as far back as the 6th Century BC! You can learn more over at Wikipedia here.
And of course math plays an important part in our wealth and asset accumulation.
So here's what we have for you this week:
On the Blog you can read Nick's post about "The Rule of 72" and below this week's featured article is about two math topics we get asked about often.
Net Operating Income and Capitalization Rates. Enjoy!
And until next time...be a Renegade!
Tom & Nick Karadza
"The Real Estate Renegades"
p.s. Not yet an Income for Life Member?
You can apply here, we'll call you to see if you qualify!
New FREE Teleseminar CD
We recently interviewed some truly amazing Income for Life real estate investors who reluctantly revealed the strategies they are using to create positive cash flow properties right in your own backyard.
This interview isn't "hype" but real results based on the implementation of a systematic investing approach.
We have recently made this available on an audio CD to anyone who requests it in an attempt to cut through all the B.S. we see and expose fundamentally correct strategies to real estate investing.
The audio CD comes with a 16-page report that tells you the truth about the system each of these investors used.
And why most people make things a lot harder than they need to be.
You request a free copy of the CD and report, while supplies last, by clicking here.
"Net Operating Income & Capitalization Rates"
Net Operating Income
Net Operating Income is commonly used to analyze real estate investments and it's really very straightforward.
Net Operating Income = Gross Operating Revenue (minus vacancy and collection losses) - Operating Expenses (excluding debt service and taxes)
Now, a few accountants in the room may start tweaking this a little bit to include depreciation and/or Non-Operating income but for most purposes the above formula is accepted as standard.
So in residential real estate investments you determine a property's Net Operating Income by taking the Revenue and subtracting the Expenses.
Revenue will typically be generating by the rent on the property and perhaps any other income (like renting out parking spaces separately or having coin operating laundry machines on site).
And expenses will be things like advertising, insurance, property taxes, maintenance, any property management and utilities (if you are paying for them instead of the tenant).
So if you have a home you are renting out for for $1,650/month and your tenant is paying the utilities your monthly expenses may include things like insurance and property taxes. Let's say that comes to $275/month.
So your annual Net Operating Income would be:
Operating Income..........................$1650 x 12
Operating Expenses......................- $275 x 12
Net Operating Income.................. = $16,500/year
You can fine tune these numbers with vacancy ratios and other minor expense but the above gives you a quick example of Net Operating Income.
An important note, your debt service (or mortgage payments) are not included in Net Operating Income calculations.
Capitalization Rates are used quite often in larger real estate investments. It's an attempt to look how fast the property will pay for itself.
In North American the most often used formula for this is:
Net Operating Income / Cost or Value of the Property = Capitalization Rate
Many first time investors search out for properties that have a capitalization rate of 10% or higher. In the GTA the reality is that for larger investment properties like apartment buildings it's difficult to find anything above 7%. There is currently a lot of demand for such properties and investors are willing to take 7% or even lower capitalization rates on these.
Here's an example. If a property produces $50,000 in Net Operating Income and the cost of the property was $500,000 then...
$50,000 / $500,000 = .1 or 10% Capitalization Rate
The property will pay for itself in 10 years.
If you want to read more check out the Wikipedia article on capitalization rates here.
For more real estate investing articles, case studies and guides visit www.TheRealEstateRenegades.com
About The Real Estate Renegades
Tom Karadza & Nick Karadza are authors of the book "Income For Life for Canadians",
available on Amazon.com by clicking here,
and work with a select group of real estate investors throughout the Greater Toronto Area.
They actually do what they talk about it.
They have been called 'Real Estate Renegades' because they are implementing
real estate investing strategies that were once thought to be impossible by
many 'industry professionals'. They focus on creating positive cash flow real estate.
In order to focus exclusively on real estate investing they have co-founded their own brokerage,
Rock Star Real Estate Inc.. The inspiration for the name came from the idea that we invest
in real estate to live life on our own terms. To create your very own "Rockstar Life", whether
that's time with the kids at the cottage or weekend gateaways to L.A. and Tuscany!
Tom & Nick are also part of several mastermind groups in Canada and in the USA and publish a monthly 12-page real estate investing newsletter and audio series exclusively for their clients.
They also offer real estate investing classes, reports, one-on-one coaching
and mentoring, and other resources to help both beginner and experienced
real estate investors achieve ultimate success. Learn more now at:
You can meet them in person at their next FREE Real Estate Investing Class, "How to Invest in Nice Homes in Nice Areas" by signing up here: www.CanadianRealEstateTraining.com
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