“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain” by Robert Frost.

Income. The life blood of real estate. Banks will lend you money, and estimate the value, on the income real property earns.

Here’s how it works:

The Income Approach (to value) is premised on the principle of anticipation, i.e. the value of property correlates to the present worth of the future rights to benefits to be received by the owner. Income approach analysis considers the property from an investor’s perspective, i.e., the basic premise being the amount and quality of the anticipated income stream is the basis for valuation.

The income approach is applied by projecting a net income stream through analysis of the projected income (reference the subject, specifically the sale proceeds of individual units at retail value), historical data, comparable property income and expense information, and historical income expense information for similar properties in the subject market area.

The estimated net income is then converted to a value indication utilizing either the process of direct capitalization (hereinafter ‘DCR’) analysis, discounted cash flow (hereinafter ‘DCF’) analysis (yield capitalization), or a combination of these methods.

Simple isn’t it? Surely any realtor can demonstrate how they extracted a cap rate from the market right? Or are you just going to sit there and let the biased commission earning realtor snooker you into believing their “analysis” based on air, rumors and unsupported phantom data hype? Don’t believe me? The next time you’re looking for income producing property – residential or commercial – just look at the data in realtor’s MLS sheet. Tragically incomplete and uninformative.

Remember: It takes a MINIMUM of Six (6) years to be eligible to sit for the Florida state certified appraiser exam. On the other hand, in 2005, it took me one and ½ days to complete the online realtors course and 33 minutes to pass state exam. There’s no comparison.

I’m begging you to find a competent educated experienced broker who happens to be a state certified appraiser. I know that sounds like an impossible dream but we exist. By example, Mims. Let us help you and protect you. Protect you from making bad real estate decisions.

I don’t trust the stock market – period. Give me a cash flowing property.

You decide. If you decide that real estate is a better investment, call a professional that will show you what numbers Prince Johnny at the bank wants to see when evaluating whether or not to loan you money.

BBQ: “I made a tremendous amount of money on real estate. I’ll take real estate rather than go to Wall Street and earn 2.8%. Forget about it.” By Ivana Trump

BLT: “Prince Johnny” by St. Vincent

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