Dunn Real Estate and Management Blog

Is This a Good Investment?

One of the reasons people enjoy (and hate!) investing in the stock market is that it’s easy to know how your stock is doing.  You can pick up your phone, check the stock price, and know exactly what your investment is worth.  A couple extra clicks and you know how much you’ve made (or lost) and you can go to sleep (or stay up worrying) knowing exactly where you stand.  The bad news is that investing in real estate is not that easy.  The good news is that Dunn Real Estate and Management is here to teach you!

When it comes to real estate, there are many different ways of figuring how your investment is performing.  Over the next few posts we will focus on what we consider the easiest and most informative ways to look at property investment and calculate your Return on Investment (ROI).

The four calculations we will look at are:

  • Cash Flow
  • Capitalization Rate (Cap Rate)
  • Return on Cash
  • Total Return on Investment

Today we focus on Cash Flow!

1. Cash Flow – Just like it sounds, Cash Flow is the total amount of money that is going in or coming out of your investment.  You calculate this by taking your total income for a month (or year) and subtracting your total costs.  See below for a simple example using the house we want to buy on ROI Road.

The House at 1625 ROI Road (Cash Flow Calculation)

Income: $1,850
House rents for $1,850/month

Costs: $1,416
PITI Payment (Principle, Interest, Taxes, and Insurance): $1,200
Maintenance: $120
Property Management: $96

Cash Flow = Income – Costs
Cash Flow = $1,850 – $1,416
$434/month or $5,208/year

A lot of investors look at Cash Flow as their number one investment indicator.  These people want to invest their money and see the return come in straight cash.  They are less concerned with the future growth of the property value and are more concerned with pulling money out of the investment today.  This can be a great way to retire early, or create some passive income on the side.  People get so passionate about Cash Flow that they even made it into a GAME!

Cash Flow doesn’t tell the whole story, however.  What if  I told you that the house on 1625 ROI Road was worth $10 million dollars? Is that the best place to put your money?  To measure how our investment is truly doing, we need to take a deeper look at the numbers. We need to use other tools in our toolbox.

Next time we’ll look at Capitalization Rate (Cap Rate). This calculation will help us see how a change in a properties Market Value can effect how we view our Return on Investment (ROI).

 Dunn Real Estate and Management is a Fort Collins based real estate firm specializing in sales, investment, and property management.

Who we are… Don Dunn

don edited blue back
Don Dunn – Owner/Broker

Don Dunn is our Broker/Owner.  Another way of saying that he’s the boss.   Don has worked in many industries since growing up in Fort Collins, but found his calling in Northern Colorado Real Estate over 15 years ago. Don takes pride in finding the perfect house for each and every one of his clients. Whether they’re looking for an investment property for retirement, cash flow, or a home to raise their family, Don works tirelessly to ensure that each client walks away happy to have had the expertise of a local Realtor they can trust.

When not in the office, Don’s favorite activities include spending time with his two grandsons (Tanner and Ryley), golfing, watching his grandkids, running, watching football, and did we mention hanging out with his two grandkids?

In a perfect world he’d be on a boat in the middle of The Virgin Islands but, for now, he’s working to make sure Dunn Real Estate and Management makes real estate investment a breeze!  Call Don today at 970-377-3500 or you can find him on LinkedIn or Facebook.

Am I ready to buy a home?

Buying a home is one of the biggest decisions you’ll make in your life and knowing if your ready is a question that everyone (not just first time home buyers) need to ask!  Here is a list of 6 things to do before you contact Dunn Real Estate and Management

  1. Do You Know Your Credit Score?:  In order to qualify for a mortgage you will need to have a good to excellent credit score.  A score over 650 will help you get the best interest rates! Go online to www.annualcreditreport.com and work to fix any negatives in the report.  Call Dunn Real Estate and we will walk you through the process.
  2. Pay Down That Debt: The first thing your bank will look at will be your debt.  If you have credit card bills, car payments, utilities bills, or student loans make sure they are paid on time each month.  You also need to work to pay those accounts down. Banks don’t like to loan to people that are in a lot of debt.  You can find more information on how to do this over at The Simple Dollar.
  3. Start Saving: Buying a home is expensive! There are great programs for first time home buyers that allow you to have a lower down payment but you will still need money for other costs.  If you haven’t yet, start saving now!
  4. Get Educated:  There are free classes that will teach you all the ins and outs of purchasing a home.  Neighbor to Neighbor is a local non-profit that offers these classes.  Go online to www.n2n.org for more information or call Dunn Real Estate and Management.  We’re happy to help you with any questions that you may have.  Call us today to schedule a time to sit down and talk!
  5. Get pre-approved:  Unless you’re planning on paying cash for your property, you’ll likely need to find a lender you’d like to work with.  Shop around and see what mortgage rates you can find.  Your Realtor should have a list of lenders that they recommend, or ask friends and family for recommendations.  Also, try contacting a bank with whom you’ve worked with in the past.
  6. You’re Ready!:  Call Dunn Real Estate and Management and let them know you’re ready to buy your new home!  We are happy to help you find the house for you.  And as an added bonus, when you buy with us, we let you out of your lease for free!

 Call us today at 970-377-3500

Introducing the Dunn Real Estate and Management Blog

We have so much real estate and property management knowledge floating around our office that we thought we had better collect some of it and post it out there in the Internets for the rest of you! So follow along and feel free to ask any questions that you may have.  We’re also happy to write a new post on any topic you would like to see covered.

We’ll be posting about all the topics that matter most to Northern Colorado property owners (and would be owners!). Whether you’re new to town and just starting to look, or you’ve been investing for years, we hope you find the information here worth your time.  We’ll be looking at the trends in Fort Collins, Loveland, Wellington, Windsor and more!   For now, check out Dunn Real Estate and Management at our website www.DunnRE.com.  You can also find us on Facebook and LinkedIn.

Thanks for stopping in and come again soon!

– Dunn Real Estate and Management

Call us today and let us show you how the right team makes real estate investment a breeze!