Need Financial Ratios
Hi everyone. As you may have guessed by the subject line, I am a newbie who is considering REI. Does anyone have a list of the financial ratio calculations used to determine the profit potential of an investment? If not, does anyone know of any good resources where this information is readily available. I have been bumming around this sight for about a month now and have encountered many abriviations (CAP, NOI, ROI) that I don't fully understand and about which I would like to learn more. Thank you in advance for all your help!
I have recently been reading Steve Berges Book on Buying Apartments. I highly recommend it!! I think it will give you the information you are looking for. It is easy to read, and yet more that the generic books on investing that say the same ole' thing over and over again. Check it out on Amazon:
http://www.amazon.com/exec/obidos/ASIN/0471436399/qid=1076147348/sr=2-1/ref=sr_2_1/102-6351362-3296939
This should help. Written for people just like you!
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=467
Cash flow is simply Gross income - exepenses - debt service = cash flow
For flipping most people use the formula:
ARV X 70% = MAO
ARV = After Repair Value
MAO = Maximum Allowable Offer
(some use 65% rather than 70)
I'd highly recommend reading "Getting Started in Real Estate Investing" as a first. Very comprehensive. check out www.addall.com.