Financial Independence Through Real Estate – Part 1

March 11th, 2008 | Stacey | Financial Freedom, Financial Independence

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Financial independence from the wise purchase and sale of real estate has been the basis for many millionaires’ success. Our new blog series will help you understand the basic concepts of investing in real estate to you can get rid of debt and get on the path to financial freedom.

Today we will cover a few basic definitions to prepare you for the entries ahead:

-capital gain is the increased value over time realized on your real property;

-cash-flow is the income you make from real estate investments after you pay all the expenses;

-cash on cash return is the percentage return on your real estate investment, also called CCR;

-expenses are the costs related to owning real estate such as the maintenance, mortgage and insurance;

-gross operating income is the total amount of money you earn, such as from collecting rent or having a fee for parking or storage on the premises also called GOI;

-net operating income is determined by taking the gross operating income and subtracting your current total expenses;

-proforma is an analysis of how real property is expected to perform; and

-vacancy rate is the amount of time the property will not be occupied.

With a basic understanding of the terms used to describe real estate properties when you are investing, you will better comprehend our future entries about attaining financial independence through real estate.