Realty411 Magazine Featuring OCG Properties - Part Two | Page 17

stalling upgrades, etc. It is all done for the
end user.
Carter: Why is it important for investors
to monitor the financial performance of
their real estate portfolio?
Dolf: Interestingly, it is important for inves-
tors in stocks and commodities to maintain
a vigilant eye on their volatile investments
so that they can jump ship if the ship starts
to sink. With real estate being a much more
stable investment, much of the interest in
monitoring your portfolio is just that: inter-
est. However, if you want to know when
you can invest in yet another property,
based on cash-reserve build-up, equity po-
sition, available collateral, etc.), then you
want to have the up-to-date information
available instantly. The Property Ledger
provides just that when you need it.
Carter: How often should an investor
track the financial performance of their
real estate portfolio?
Dolf: As often as they feel comfortable.
One of the advantages of real estate invest-
ing that I often tout is that unlike the stock
market, where you have to monitor your
investments regularly, with real estate, you
can buy a property and put the title in a bot-
tom drawer, take a six-month cruise, and
not worry if you should sell the property
again. However, it is comforting to be able
to put your finger on the pulse of how your
investments are performing.
Carter: What is your favorite financial
calculation when analyzing your proper-
ties? And why? Here are the choices:
•Gross Rent Multiplier
•Cash-on-Cash Return on Investment
•After Tax Cash-on-Cash Return
•Internal Rate of Return
•Return on Equity
Dolf: I like to analyze based on cash-on-
cash return. This calculation shows you
how the cash you are putting up is perform-
ing. It is the prime indicator of how you
can truly leverage your money. What other
investment allows you to get a $100,000
asset for only $10,000 or $20,000 in cash?
For most investors, you can’t buy
$100,000 worth of stock or gold or oil
without coming up with the entire pur-
chase price in full. When you put up all the
money to buy an investment, the return is
simply the income divided by the invest-
ment. With real estate, since you only need
to come up with a small portion of the pur-
chase price in cash, the cash-on-cash return
becomes very important and, dare I say
it, interesting. It is an advantage inherent
in real estate investing that is often over-
looked by financial advisors.
Carter: What type of investment do
you favor right now and why?
Dolf: When it comes to residential property,
I prefer the single-family home. However,
for the last two decades, I have personally
focused on commercial real estate. That
doesn’t mean I haven’t invested in other
sectors but the benefits of commercial real
estate for the property owner are incred-
ible. Here are just a few of the benefits:
1. The leases tend to be much longer —
anything from three to twenty years. They
are generally secured by the business, with
the owners offering a personal guarantee.
2. Commercial tenants tend to maintain the
property better as the look and condition of
the property is important to their business.
Continued on next page