256: The Real Estate Numbers That Matter with Frank Gallinelli
Get Rich Education
Keith Weinhold
4.3 • 602 Ratings
🗓️ 2 September 2019
⏱️ 51 minutes
🧾️ Download transcript
Summary
Real estate math is simple: add, subtract, multiply, divide.
There’s no complex math like trigonometry, algebra or exponents.
Frank Gallinelli, Ivy League Professor of Real Estate Development at Columbia University in New York City, joins me to talk real estate numbers.
Net Operating Income (NOI) estimates current market value of a property.
NOI is rent minus VIMTUM. It does not include Principal and Interest.
Your Debt Coverage Ratio (DCR) had better be greater than 1. You typically need a minimum of 1.2 to 1.25 to qualify for a property.
Loan-To-Value ratio discussed.
Seller “asking price” is almost irrelevant. A property’s current market value is = Annual NOI / Cap Rate.
Cap Rate = Annual NOI / Property Price or Value.
Internal Rate Of Return (IRR) is more of a total return. Part of it is discounting your future cash flows. This considers your opportunity cost.
I give an example of buying a new $20,000 heating system for an apartment building.
- This resulted in lower heating bills.
- This increased cash flow (and NOI) by $4,800 annually.
- Divide this by a 7% Cap Rate = $68,500 value increase.
Therefore, a $20K investment both improved cash flow and increased building value by $68,500.
I dislike GRM - Gross Rent Multiplier.
Franks dislikes CCR - Cash-On-Cash Return.
Return On Equity vs. Return From Equity.
Don’t get too lost in numbers. No property exists in a vacuum. The vibrancy of the market is more important than the property.
Get a 30% discount on Frank Gallinelli’s “Introduction To Real Estate Analysis” video course at learn.realdata.com with Discount Code: SAVE30
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Transcript
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| 0:00.0 | Welcome to Get Rich Education. I'm your host Keith Weinhold. Today we're talking about the real estate numbers that matter with an Ivy League professor of real estate, net operating income, debt coverage ratio, the time value of money, cash on cash return, and more, and what these numbers mean to you as an investor today on Get Rich Education. |
| 0:23.4 | Countless property investors get killed with maintenance costs, but that's far less likely |
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| 1:01.7 | Finally, total control financial gives you checkbook control of your 401k and IRA money to invest in real estate. |
| 1:07.2 | It's time to get your retirement money into your own checking account, but you've got to avoid the little-known tax that you'll pay with any self-directed IRA. Instead, it's time for the |
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| 1:20.1 | letters to 72,000. You're listening to the show that has created more financial freedom than nearly any show in the world. |
| 1:33.9 | This is Get Rich Education. |
| 1:38.4 | Music Welcome to GRE, Episode 256. |
| 1:52.5 | I'm your host Keith Winehold. |
| 1:54.0 | This is Get Rich Education. |
| 1:56.2 | Very few people, if any, have contributed to your understanding of real estate numbers, |
| 2:00.5 | perhaps then our guest |
| 2:01.9 | today with his data analysis, his top selling book, and later today he has a video course. |
| 2:09.1 | You know, even if you're not a numbers person, the comforting thing that I can tell you about |
| 2:14.2 | real estate investing is that all of the operations and the math are simple. |
| 2:20.0 | Yes, it's either addition, subtraction, multiplication, or division. |
| 2:25.2 | Pretty simple stuff. |
| 2:26.7 | There are no exponents, trigonometry, or calculus involved here at all. |
... |
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