Tag: real estate education

Video post: Understanding Net Operating Income, Part 2

In Part 1 this post, we looked at the revenue side of our NOI calculation. Now let’s look at the expense side, and how the end result – the NOI itself, is typically used when evaluating a potential real estate investment. Click the image below.

 

If you missed Part 1, you can watch it here.

Copyright 2021,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

Video post: Understanding Net Operating Income, Part 1

One topic that seems to generate a lot of interest and questions among investors I speak with is the subject of net operating income. Those who are new to real estate investing and even those with some experience are often unclear as to exactly what it is, what it means, and how to use it.

To shed some light on this topic, I’m going to try something new here – new for me at least – a video blog post. I’ll try to answer those questions by giving you a basic roadmap of how Net Operating Income is calculated, and how it’s used in real investment situations. So —  here we go with Part 1 of 2. Click the image below.

net operating income

 

Part 2 is now available here.

 

Copyright 2021,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

 

New content in my online video course

Those of you who are already enrolled in my course, Introduction to Real Estate Investment Analysis, are probably aware that I’ve been regularly adding new content to the course over time.

My most recent addition is a lesson on “Phantom Income.” The lesson discusses how and when it might be possible for your taxable income to outpace your cash flow. Probably something you’d prefer to avoid if you could.

New content like this is always available at no charge to those who are enrolled in the course, but for a limited time this new lesson will be my treat to anyone who would like to view it.

So, even if you’re not already enrolled, just go to the course home page, and scroll down about two-thirds, past my smiling face, until you see the curriculum. You can find the lesson in the middle of the section called Real Estate Pro Formas. Click the Preview button to watch.


In case you missed it, I also added a three-part series this summer called, “Blend and Extend.” 

This is a technique that landlords and tenants have used during difficult times in the past — a technique where a bit of give and take could potentially benefit both parties. A timely topic, I believe, given the upheaval in commercial real estate during the pandemic.

I’m making the first video in the series available as a free preview. Again, go to the curriculum, but this time expand it and scroll to the very bottom to find “Blend and Extend.” That’s where you can preview Part 1.

In the two remaining lesson in this series, I go into more specifics about the ways you might actually run the numbers on a possible lease restructuring to find a scenario acceptable to both sides. I include examples was well as an Excel model that should help you with the calculations.

Since the original release of the course, I’ve added a great deal to my core content, including a series of case study examples, as well as modules on partnerships, development projects, and value-add investments.

But I’m always enthusiastic about broadening the scope of the learning you can derive and the benefits you can reap from the course. Do you have an idea for an additional topic you’d like to see? If so, please pass along your suggestion in the comments section! Thank you.

— Frank G

Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

“The Top 10 Real Estate Finance Books Every Investor Should Read.”

investment book

I was honored to find that one of my books was featured at the top of a recent article on Motley Fool: “The Top 10 Real Estate Finance Books Every Investor Should Read.” The book, “What Every Real Estate Investor Needs to Know About Cash Flow,” was originally published in 2004, is now in its third edition, and is alive and still doing well —  a surprise certainly to me, and probably to the publisher as well.

I often get asked what accounts for the book’s long-term appeal, and I think there may be two reasons: First, I avoided “topical” or trendy content, preferring to stick with core concepts and math-based metrics don’t change with time. And second because I really dislike the get-rich quick hype that seems to characterize so many real estate books, and so I shunned that, too.

I don’t think they’ll ever make a movie out of it, but I’m satisfied if it has helped some readers make informed and unemotional investment decisions.

You can find the article here.

Are you involved in real estate education?

We’re reaching out to our followers who teach real estate investment, development, or finance to let you know that our Real Estate Investment Analysis course is available for the virtual classroom – now with volume academic pricing.

For more than a decade I’ve devoted much of my professional life to investor education, as a writer, Columbia adjunct professor, and through my company RealData. As you may know, a few years ago I created an online video course, Introduction to Real Estate Investment Analysis. It has grown to include a broad range of topics that are key to understanding how income-producing properties work, and how investors, developers, lenders, and others evaluate their financial dynamics.

With so many schools and colleges now needing to provide good content for a virtual learning environment, we’ve re-deployed the course as a resource that instructors can add to their existing curricula. We now offer volume academic pricing at a significant discount, depending on class size.

For an overview, including access to sample lessons, go to the course home page.  To see a complete course outline, click here.

If you’re involved in real estate or financial education, then I hope that this can help you provide meaningful content to your remote learners. To get a quote for volume licenses for student use or to discuss this further, please email me at education@realdata.com.

— Frank Gallinelli

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Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

Now earn a digital certificate with my video course, “Introduction to Real Estate Investment Analysis”

Professional education is a great thing. And being able to broadcast news of your success makes it even more valuable.

That’s why I’m announcing a new benefit to students who enroll in my course, Introduction to Real Estate Investment Analysis. I’m now awarding a digital Certificate of Achievement and badge to students who successfully complete the course.

Here are some questions you probably want to ask:

What does it cost? For my students: nothing. RealData is picking up the cost of issuing and hosting the certificate.

What do you mean by “digital certificate?” Your certificate will be hosted by Accredible.com, an industry-leading credentialing platform. As you’ll see below, it’s designed so you can share it easily.

Does that mean I don’t get a physical certificate to hang on my office wall? No, you also get a pdf version you can print.

What’s so special about this digitally hosted certificate?  So glad you asked. Here are a few things you couldn’t do with a traditional certificate:

  • You receive a unique url for your Certificate, so you can share it with employers, clients, industry groups, just about anyone.
  • You can share it on any of your social media networks with just a click on a toolbar.

 Your personal certificate page includes a dashboard, as shown at the left. From there you can…

  • Add it to your LinkedIn profile
  • Add it to your email signature
  • Get the code to embed it in your website
  • Email it to anyone
  • Download it as a PDF
  • Download a badge image, which you can attach to your email signature, put on business cards, etc.
  • Add “evidence” to your certificate to increase your credibility — examples of your work, videos about yourself, links to projects you’ve been involved with – and even more

How do I obtain my certificate?Within a few days after you complete the work to earn your certificate, we’ll send you an email with instructions to access it. If you believe you’ve completed the requirements but haven’t heard from us, please contact us at mailto:education@realdata.com

Terms of Use: Please review our common-sense Terms of Use

I believe our online video course provides a solid educational opportunity for those who want to learn about real estate investment and development. I hope this digital certificate will recognize your efforts and will benefit you for devoting the time and effort to pursue that education. I look forward to contacting you when you complete your coursework!

Frank Gallinelli

Learn by Example

I’ve seen a great deal of interest in the real estate investment case studies that are part of my investment analysis video course — so I’ve spun those cases off as a new mini course, one where you can learn by example.

The cases deal with three different property types:

  • apartment building,
  • mixed-use, and
  • triple-net-leased

They’re similar to those I cover in my grad-school course at Columbia, and I’ve designed them with several purposes in mind:

  • To give you practice working through bumper-to-bumper deal analysis. On what terms does each deal make sense to you?
  • To introduce special situations that you need to understand, such as expense recoveries and triple-net leases.
  • To give you an opportunity to put yourself inside the deal as if you were a real participant, to think as an investor thinks — beyond the numbers, beyond the surface data, as if real money were on the table.

Once you’ve learned about deal analysis with this mini course, you’ll probably want to take the complete course, covering detailed real estate investment metrics, partnerships, development, and more. So here’s more good news:

When you upgrade to the bigger course, you’ll get full credit for  this mini course.

Learn more about my case study course

New Version of our Income-Property Video Tutorial

Screenshot 2016-06-30 09.36.08We’ve just released an updated version of our video tutorial, How to Evaluate an Income Property Investment with REIA Pro. We’ve given the video a serious makeover — additional content, better audio and graphics, greater emphasis on how to use RealData’s REIA software to perform an analysis — and have added a seventh video that provides an overview of some of the software’s more advanced features.

•    You get access to the web-based video series on our new e-learning platform. Watch it online at your convenience — on your desktop or mobile device.
•    The property analysis is based on a sample case study of a mixed-use property.
•    The series uses our REIA Pro product to analyze the investment, but many of of the features portrayed in the videos are found in the REIA Express edition.
•    The series is presented by Frank Gallinelli, founder of RealData, Inc.
•    Includes seven videos with over 2 hours of instruction

If you’ve already purchased the original release of this series, you’ll receive an email with instructions on how to get the new version at no charge. If you haven’t purchased it before, we invite you to download the case study and view a lesson-by-lesson synopsis.

New Podcast: Investing in Income-Producing Real Estate

I had the privilege recently of recording a video podcast with REICLub, where we discussed investing in income-producing real estate: deciding what kind of property you should buy, how to begin the analysis process, understanding the income stream, estimating value or worth, dealing with long-term projections, recognizing common pitfalls, investing with partners.

I invite you to view it here:

http://www.REIClub.com/FrankGallinelli

—Frank Gallinelli

What is Your Marginal Tax Rate, and Why is It Important to You?

marginal tax rateUnless you make your living by helping people complete their returns, you probably prefer to spend as little time as possible thinking about income taxes. The rules and forms are generally opaque and the process is often stressful. However, there is at least one concept in the U.S. tax system that is both very simple and really important, and yet I find that it is unfamiliar to many. That concept is the Marginal Tax Rate, and the short version goes  like this:

Your marginal tax rate is the rate at which your next dollar of income will be taxed.

Now let’s see just how that works and why it matters to you.

Tax Brackets

If the U.S. had a so-called “flat tax,” then each person would pay a fixed percentage of his or her income. For the sake of example (and putting all political agendas aside), let’s say the flat rate were 10%:

$10,000 income x 10% = $1,000 tax

$1,000,000 income x 10% = $100,000 tax

Simple enough, and the person with the higher income would pay a proportionally higher tax.

However, the U.S. has instead what is called a “progressive” tax system. It’s like a layer cake. The bottom layer is taxed at a certain rate; the next layer is taxed at a higher rate; the next at a still higher rate. We call these layers “tax brackets.” Here is what the brackets for a married couple filing jointly looked like in 2015:

Screenshot 2016-02-03 10.37.06

The logic here is that the higher your income, the higher the rate at which that income will be taxed. The tax rate becomes progressively higher as income increases, hence the name.

What Is Marginal Tax Rate?

Your marginal tax rate is simply the rate at which your next dollar of income will be taxed. Let’s say that our married-filing-jointly couple, Jack and Jill, had income only from their jobs in 2015. After deductions, they had a taxable income of $74,900. They are at the top of what we would call the “15% tax bracket.”

Then Jill received a one-time year-end bonus of $1,000, raising their total family income to $75,900. How much of that bonus will be lost to federal tax? Recall our table:

Screenshot 2016-02-03 10.47.12

Every dollar earned starting with dollar # 74,901 (and continuing until 151,200) is going to be taxed at 25%. So she will pay $250 of that bonus in federal tax.

$1,000 x 25% = $250

What Marginal Tax Rate Isn’t

If someone were to ask our couple what tax bracket they were in, they would say, correctly, “25%.” Many people assume, incorrectly, that this would mean they are paying 25% of their total income in taxes. But that is not the case. This couple is paying 10% of their first $18,450 of income, 15% of the next $56,450, and 25% of the last $1,000.

And so, they are actually paying an effective rate that is just a bit less than 14%.

Screenshot 2016-02-03 10.32.27$75,900 income / $10,562.50 tax = 13.92% effective tax rate

Why Does It Matter to You?

Now that you understand how it works, you ask the obvious existential questions: So what? Why do I care?

Knowing your marginal tax rate is essential to anticipating the tax consequences of new income or new deductions. Consider some examples:

Our couple knows that their effective tax rate is currently around 14% but their marginal rate is 25%. What if they decide to acquire a profitable new investment property? They need to recognize that the additional income, which is layered on top of their employment income, is going to be taxed at their marginal rate of 25%. That information may factor into their decision as to whether the income from that property, after-taxes, is attractive enough to justify the cost and the effort.

What if they were thinking about making a $1,000 donation to charity at the end of 2015, or possibly waiting until next year to do so? If Jill’s bonus is indeed a one-time event, she would save $250 on their joint taxes if she makes that donation this year, while she is in the 25% bracket; but she would save only $150 if she waits until next year when she expects to drop back under the 25% marginal rate and into the 15% bracket.

Perhaps in 2016 this couple encounters a fantastic real estate opportunity where they make a quick $85,000 profit. Short-term gains are treated as ordinary income, so add this profit to the $74,900 taxable income they had expected from their jobs and you can see that they will catapult across two tax brackets. At $159,900, assuming the bracket table remains the same, their marginal rate is going to jump to 28%.

Screenshot 2016-02-03 10.47.32

By being aware of their new marginal rate and where it is that they may fall within that 28% tax bracket, they can do some sensible tax planning. It looks like $8,700 of their income (i.e., the amount that their 2016 income is over $151,200), will be taxed at 28%. Are there some 2017 deductions that they could accelerate into 2016? Perhaps they could pre-pay the property taxes on their home. All or part of that deduction would save 28% if they took it the year of atypically high income, versus 15% in a year where their income returned to the 15% bracket.

One word of caution to so-called high-income investors (and that could mean folks with income as low as about $200,000 for individuals or $250,000 for joint filers): There are a variety of potential gotchas lurking for you in the ever-changing tax code. Certain deductions or exemptions may phase out, and the Net Investment Income Tax may kick in. Don’t try parsing this at home; consult a professional tax advisor.

For most people, however, awareness of your marginal tax rate and where you fall in the tax-bracket chart can be a big help in understanding the consequences of changes in income and making informed tax-planning decisions.

—-Frank Gallinelli

Want to learn more about real estate investing? Visit learn.realdata.com

Your time and your investment capital are too valuable to risk on a do-it-yourself investment spreadsheet. For more than 30 years, RealData has provided the best and most reliable real estate investment software to help you make intelligent investment decisions and to create presentations you can confidently show to lenders, clients, and equity partners. Find out more at www.realdata.com.

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Copyright 2016,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles and blog posts that appear on realdata.com is provided as general information and is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.