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| MinWoods |
 Posted: Wed Aug 20, 2008 11:11 pm Post subject: Deal Analysis Basics - Buying Cash Flow |
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Some real estate investors and Builders Cochin , buy properties to fix up and immediately resell. Some real estate investors buy properties to rent out and ultimately make a monthly income from their rents. When you are wholesaling properties, you may come across both types of investors and in this article I will be discussing how to analyze deals from the perspective of a buy, rent and hold investor. By understanding how they look at their deals, you can buy your deals better and also make your best presentation when trying to sell your deals to these types of investors.
Net Operating Income: When you take the rent you are receiving from a property and subtract out all the expenses except the mortgage payment, the remaining value is the Net Operating Income.Investors use Net Operating Income (or NOI) to determine how much debt a property can afford to support and as a gauge of what they can afford to pay to purchase a new rental property.Here is a quick run down of an over-simplified deal.
Example: If you have a property that brings in $1,000 per month in rent and you assume that for 1 month out of every 20 the property will be vacant, we can subtract off a vacancy allowance of 5% (1 out of 20 months = 5%).So, $1,000 per month is actually really only $950 per month when you figure that for one month out of every twenty you will have no income from the property. That's what the vacancy allowance takes into account.Now, from the $950 per month left over, we can subtract the rest of the expenses including management, maintenance, taxes, insurance, utilities if the landlord needs to pay them and any HOA fee.In this example, here are the expenses:
Management: 10%
Maintenance: $50 per month
Taxes: $105 per month
Insurance: $50 per month
Utilities: None - Tenant pays
HOA: No HOA
So, from the $950 we subtract $95 for management (that's 10%), $50 for maintenance, $105 for taxes and $50 for insurance. This leaves us with $650 per month in Net Operating Income (NOI).So, $650 per month is the amount of debt, in the form of a monthly payment, that the house can afford to support.If we plug into a financial calculator a payment of $650 per month, an interest rate (whatever the current rate is.,we'll use 7% here), and a 360 month term (30 year loan), then we can solve for what amount of money could be borrowed. |
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| cool124 |
| Posted: Mon Aug 25, 2008 12:15 am Post subject: Find Real Estate Agent |
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Portland Real Estate Agent with an interior design background and loves to be creative in many forms of design. She can help you decide the best fit for you whether it be purchasing a home, or preparing your home for selling. Kerris ethic allows her to make sure that your goals, desires, and needs are ultimately attained. Please allow her to be your guide in the journey of home buying or selling.
Kerri Weiland will help you with all of your real estate needs.
Portland Real Estate|Austin Texas Real Estate|Lake Oswego Real Estate|Rent to Own Real Estate |
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