This biweekly sponsored column is written by the experts at Gordon James Realty, a local property management firm that specializes in residential real estate, commercial real estate and home owner associations. Please submit any questions in the comments section or via email.
Real estate investments should be made on their potential to produce a good return (ROI) and consistent cash flow. Experienced real estate investors use financial metrics such as net present value, internal rate of return, and capitalization rate to evaluate real estate investment opportunities.
Net Present Value (NPV)
The net present value (NPV) is a good place to start. The formula provides a broad overview of the value of future earnings in contrast to money invested in the present.
The metric isn’t perfect, but it does give you an idea of whether you’ll gain or lose on a property. Because of that, it’s a good calculation to use when deliberating between a couple of investments. It should always be paired with other financial data before coming to a final decision about a property.
Internal Rate of Return (IRR)
The internal rate of return (IRR) is the discount rate, or interest rate, used to produce an NPV of zero. Generally, the higher the IRR, the better. It means that an investment has less risk associated with it.
However, the IRR calculation, like the NPV, is influenced by cash inflows and outflows, inflation, and other factors throughout the years you hold the property. It should be combined with other financial metrics to develop a clearer picture of your real estate investment portfolio.
The capitalization rate is more often termed “cap rate.” It measures the rate of ROI and is based on the annual net operating income (NOI) of the property. It’s a simple way to calculate potential returns and compare them against current market trends.
Like other calculations, the cap rate has limitations. It only analyzes one year of prospective NOI, a number that doesn’t and often cannot account for expenses like taxes or financing costs. While it’s a good number to have in hand, you should always view it as an exploratory, rather than final, number when evaluating real estate investment opportunities.
Real estate can be highly lucrative. However, it requires careful consideration and an understanding of some basic financial metrics. Always evaluate your real estate investment opportunities’ NPV, IRR, and cap rate before committing to one of them.
In fact, if you’re contemplating a property and would like some advice, we’re happy to help. Not only do we provide residential property management services, but we also counsel clients on their investments.
Our Mom Eugenia may finally be ready to “opa” later this week in Shirlington. The popular, family-owned Greek eatery is preparing to open its newest location on Thursday (March 30),…
The Arlington County Board approved zoning changes to accommodate “missing middle” housing units, such as duplexes, triplexes, and small multi-family buildings, in areas designated for single-family homes. While some argue…
Sponsored by Monday Properties and written by ARLnow, Startup Monday is a weekly column that highlights Arlington-based startups, founders, and local tech news. Monday Properties is proudly featuring 1515 Wilson Blvd in…
From Ballston to Pentagon City to D.C. to Fairfax County, there’s a burning smell that seems to be lingering outside.
Synetic Theater Camps are a wildly fun, highly accessible choice for young people who love moving, playing games, and making memories. Registration is open now for Summer Camps (sessions June 20-August 25) and there are even a few spots left for Spring Break camp, April 3-7.
Located in National Landing, these performance-based camps are designed for students of all ages – no theater or performance experience required.
Led by professional teaching artists, campers learn acting, movement, and technical theater skills through the lens of Physical Theater. Physical Theater incorporates acting, movement, dance, mime, and acrobatics. If you’ve seen a Cirque du Soleil performance, you’ll find many similarities.
Most first-time campers are new to the performing arts, and teaching artists are well-versed in engaging students at all levels. Parents and campers report that one of the best parts of Synetic is the community, with many families returning year after year because they feel a strong sense of belonging.
EDBS Dental Billing Solutions is pleased to announce that it has achieved compliance with the federally mandated standards of the Health Insurance Portability and Accountability Act (HIPAA) through the use of Compliancy Group’s proprietary HIPAA methodology, The Guard® compliance tracking software, and HIPAA Seal of Compliance®.
The HIPAA Seal of Compliance is issued to organizations that have implemented an effective HIPAA compliance program through the use of The Guard, Compliancy Group’s proprietary compliance tracking solution.
Clients and patients are becoming more aware of the requirements of HIPAA compliance and how the regulation protects their personal information. Forward-thinking providers like EDBS Dental Billing Solutions choose the HIPAA Seal of Compliance to differentiate their services.
“Since the nature of our business being exclusively remote, we take HIPAA compliance very seriously. With the help of Compliancy Group, we are able to take steps to fortify our systems to protect PHI information and familiarize each employee about HIPAA and how we can further safeguard PHI data.” said EDBS Dental Billing Solutions founder Goldie De Leon.
WHS Spring Festival
Join us at the WHS Spring Festival on April 22, 2023, from 10am- 3pm at Wakefield High School(main parking lot). Come out to shop, play, and eat!
Shop local vendors, arts & crafts, new and used items, food vendors/trucks, and
District 27 Toastmasters 2023 Virtual Conference
District 27 Toastmasters invites you to its annual conference where you can hear phenomenal speakers, attend professional development and personal growth seminars about leadership, negotiation, communication, teamwork, and mentorship. Learn how to develop your personal story and how to improve