Trying To Calculate The Net Operating Income?
I am looking at a property that only has gross income reported.
Before I do a lot of research on the property, I would like to know if any of you have a quick rule of thumb in determining NOI.
It is a duplex, so would you say that 25% of gross income would go to expenses? Also this percentage is with a property management company. because it is out of state.
generally i use 35% ...but it can run higher depending on full scrutiny...hope that helps...CWal
If this property is with a property management company, they should have quick/easy access to expenses. I certinaly would make an offer contingent upon review of financials, including Schedule E.
Some properties have 45-50% expenses. Try to get accurate figures from owner / manager.
64 Ford is correct. If the information is not available, I take a worst case scenario, and assume 50%.
You should be able to pin down some of your expenses. You should get the current tax or the tax rate for the area, you should get insurance information as well. If it is to be managed then you must be getting quotes from management companies. The bulk of what will be missing is maintenance and repairs. These can vary depending on the size and age of the building. If the building is a duplex and in reasonable shape, I usually use about 11% of gross for M & R. That being said I would also look at some accounting and schedule E as was suggested in other posts.
Regards,
Ed[ Edited by edmeyer on Date 11/01/2004 ]
Remember to never take the sellers word on taxes, they almost always lie about this, be sure to run your numbers at your proposed purchase price. There is a nice calculator on Russ whitney's page but you still have to add vacancy percentage, repair percentage, etc