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Real Estate Investing: The new property calculator

Posted March 4, 2008

"My friend and mentor PS taught me another way to analyze a real estate investment. The best part of his formula is that it can open up your eyes to possibilities you never even considered." — Marc Charles

by Marc Charles

Baltimore — (TFN): "Opportunity is often difficult to recognize; we usually expect it to beckon us with beepers and billboards." — William Arthur Ward

Many real estate developers and investors use a simple formula to calculate net income when evaluating the viability of an investment property. And there's nothing wrong with that formula.

Example: Let's say you are going to purchase a single family home for $250,000 with the intention of making it a rental property. The monthly costs to maintain the property are $800 (principal, interest, taxes, insurance, and maintenance). The property rents for $1,500. This leaves you with a net income of $700 ($1,500 - $800).

But my friend and mentor PS taught me another way to analyze a real estate investment. The best part of his formula is that it can open up your eyes to possibilities you never even considered.

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Real Estate Investing: Offbeat properties

PS made two fortunes in real estate. He made his first fortune the way many others did - by acquiring homes, medical office buildings, strip malls, and apartment buildings at deep discounts and then selling them for a profit. He made his second fortune in a more unusual real estate market: self storage.

Now many investors discount offbeat real estate investments like self storage. But when you apply PS's formula, you can see how much money you can stand to make from them.

His formula figures out the actual revenue per square foot of an investment property. It doesn't sound particularly special. But when he showed me how to apply it to a variety of real estate investments, I was shocked when I saw the numbers. Read on to learn how to get the most out of your real estate investments.

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