You must be able to obtain suitable financing on the property for it to be a good deal. The type of financing available, specifically to you, can make the property more or less desirable. What may be a good deal for someone else may be a bad deal for you.

This is usually determined by the type of financing that you are able to obtain to purchase the property. Do not accept financing that is so expensive that it will produce a negative cash flow just because it is the only financing that you can qualify for. If you can afford the negative cash flow and are sure that you will be able to qualify for a more reasonable loan that will allow the property to produce a positive cash flow in the near future, the purchase may not be such a bad idea. The main point is, if you cannot hold on to the property with financial comfort, whether or not it would be a great deal for someone else who can obtain better financing, it is not a good deal for you. The next section will go into detail on some of the best ways to finance rental properties.

The type of financing you are able to obtain will also affect your ROI, or return on investment. The ROI determines the rate of return an investor will earn on the amount he was required to put down in order to obtain the property. This rate is calculated by dividing the property's annual net income by the investor's down payment. For example, if a property's net income is $4,000 per year and the investor puts down $2,000 to acquire the property, then his ROI is 200 percent, ($4,000 / $2000 = 200). If he did not have to come in with a down payment in order to acquire the property, then the return on his investment is infinite. You cannot get this type of return by placing $2,000 into a savings account at your bank. The investment that offers the highest ROI without significant risk is the best place an investor can put his money. The higher your ROI, the greater your positive cash flow.

In real estate, there are two types of ROIs:

Simple ROI: This is when the ROI is determined by taking into consideration the annual cash flow that the property produces without taking into consideration the property's appreciation, average annual rent increase, and principal payments being paid from the tenants' rents.

Complex ROI: This ROI does include a property's appreciation, rent increase and principal payments, as well as the property's annual cash flow. To fund this, you add the dollar amount of the average annual appreciation, average annual rent increase and average annual principal payments into the net income before dividing the property's annual net income by the investor's down payment. The average annual appreciation and rent increase depends on the area. You can find out what these averages are through the area demographics often found on the Internet, in local real estate offices and at property management companies.

Once you have these percentages, multiply the appreciation rate by the purchase price of the property to determine the property's amount of annual appreciation; then multiply the rent increase percentage by the property's gross annual rents to determine the amount of annual rent increase. To determine the average annual principal payments, just divide the entire loan amount by the number of years it will take before the loan is paid off. Now you are ready to calculate the Complex ROI. For example, if the property's annual net income is $4,000, its average annual appreciation is another $4,000, the average annual rent increase is $320 and the average annual principal being paid off is $3,333 then the ROI is $11,653 ($4,000 + $4,000 + $320 + $3,333) divided by $2,000 (the down payment) = 582.6 percent per year. Wow! This is the most accurate determination of an investor's return on investment.

Paul Pratt

Our team's diverse backgrounds and investing experiences include a high school teacher, a college drop-out, an MBA graduate, a waiter, a secretary, a real estate agent, a banker and a stay-at-home mom. Despite our diverse backgrounds, we shared a common, life-changing event; we all made the decision to truly change our lives. Although our starting points couldn't have been any more different, we each discovered that our journey toward financial freedom began with real estate.

Most real estate investing "gurus" offer a "one-size-fits-all" approach, providing generic ideas and uncertain results because their philosophies fail to consider individual experience and circumstances. Our personalized approach, the understanding that each of us has a very unique background and set of circumstances, is what has made MyreiTeam’s system so effective.

After years of learning "the hard way", we are now living our dreams. The high school teacher now has the ability to spend more time with his most important students, his own kids. The college drop-out is retired and enjoying exotic fishing and hunting trips. The waiter is now waited upon, vacationing and skiing in the world's greatest resort towns. The MBA grad and banker own their own real estate investing firm and the secretary now manages her own employees who are devoted to her real estate empire. The stay-at-home mom has moved her family into a luxurious 8,000-square-foot scenic mansion.

All of the wealth and success we have been enjoying has been better than we could have dreamed. But even more satisfying and phenomenal was the rate at which the Personalized Investor Matrix™ was creating wealth for our friends and family who were using it to get started in real estate. Now we want to share this revolutionary approach with you. Our powerful, personalized investing system is now at your fingertips.

MYreiTEAM is exactly what it says, your team! We are here to provide you with all the help and support you need to succeed. If you have investment questions, need some support or motivation, or if you just made an exciting deal and just want to share your experience with somebody, post your question or experience on the My REI Community board. One of our team members will quickly respond to your question with expert advice. The point is we are committed to your investment success and are excited for the opportunities that lie before you. Welcome to MYreiTEAM!