numbers are for illustrative pur- poses only. So, let’s assume the real estate investor did their job and chose the right people to work with, selected the right business (property) to pur - chase, and kept it reasonably rented for the entire time of ownership. Who pays off the financing? If you said, “the tenant,” you are cor- rect. Over the life of that 30-year loan, tenant rent payments will be used to satisfy the terms of the financing. Let’s do the actual calculation. The simplest way to see what kind of return was received just for the amortization would be to calculate
complete view of how a real estate investor fully benefits. Such calculations are a way of determining, in a fast-paced world, whether the opportunity provided via proforma is one worth taking a deeper dive into. When taking that deeper dive, I prefer to look at the property’s appeal to the potential tenant. In addition, would it be the type that would remain reasonably occupied for the duration of my ownership? Lastly, is it a market in which I can raise rents? If the real estate investor, as the CEO of their real estate investment business, is capable of making the
correct decision about who they work with on the acquisition, man- agement, maintenance, and finance, then they can have a much more sig- nificant outcome than what is offered on the common proforma. CRUNCHING THE NUMBERS Using some baseline numbers, let’s explore what these returns could be. Let’s use a $150,000 acqui - sition price, with 20% down, a 0.8% rent-to-value ratio, a 30-year fixed loan, and $200 per month cashflow. Every market is different, and every outcome has its variances, so these
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