Calculate the NOI to Make to buy at the Right PriceThis is a 36 unit complex and seller is offering to take back a second trust
for 500K at 1%, due in 3 yrs. What kind of interest rates could I expect? Asking Price $3,960,000Annual IncomeGross Scheduled Income ($433,800)
- Vacancy ($10,021)
- Credit Loss ($6,941)
= Effective Rental Income ($416,838)
+ Other Income ($5,200)
= Gross Operating Income ($422,038)Annual Operating Expenses
Tax ($16,073)
+ Insurance ($12,820)
+ Property Mgmt. ($10,000)
+ Repair and Maint. ($15,600)
+ Advert. and Promo (200)
+ Utilities ($89,896)
+ Services ($10,000)
+ Other Expenses ($6,000)
= Annual Operating Expenses ($160,589)Net Operating Income
Gross Operating Income ($422,038)
- Annual Operating Expenses ($160,589)
= Net Operating Income ($261,449) At a 10% cap rate, this property is worth $2.6 mill. Unless this property is located in
an high demand and rent area , this property is over-priced. I’s good that the seller is willing to carry some. That makes the terms very favorable), but when it comes time to recapture that debt and pay the seller the 2nd, you’re going to be in trouble.
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