17 Unit
Any comments on the reasoning of this property.
17 unit for $675K -$39,705. a unit
GRI $117800
EX $31753
Tax $8644
Ins $4360
NOI $85427 / .12 = $711890 value
According to my calculations this property based on the NOI is worth much more than this, if I'm right it will probably be under contract by tomorrow. Is that the basic way to analyze property value by income?
look at what the debt service is going to be.
FYI, there care several analysis programs that calculate all this for you.
Jerome,
Yes, that is exactly correct. You can also divide the NOI by the operating income. This will give you the cap rate. anything over .10 is ok. in this case the cap rate is .1265-- an excellent buy.
There are two additional considerations I'd factor in.
1) How sure are you of the income and expense numbers? I'm assuming that these numbers are provided by the seller. Do they include management expenses? Are they actual last-year numbers? How do they compare to other expenses of buildings in the area? The Institute of Real Estate Managment publishes every year an income and expense guide which looks at thousands of apartment buildings, even breaks the results down by city. Expenses are analysed by cost per square foot and as a percentage of income.
2) Is there any defered maintenance? This is a sign that the expenses shown are not adaquate to maintain the property on an on-going basis.
But both of these you can work on after you have it under contract. First blush its a good deal. Go sign it up with a mortgage contingency and a due diligence period.
Finally lets see how you do on this property:
Assuming that the NOI you report checks out and that you put down a "conventional" 20% and borrow the rest at prevailing mortgage rates (7% 30 years). Your ROI on the downstroke is 31%. Get the seller to carry back a 10% second at 10% interest, 30 years and your ROI jumps to 54%. Not bad at all.
Good luck with the deal. Buy all those you can manage.