Real Estate Calculators Every Investor Should Know
Putting resources into a property can be energizing, yet setting aside the effort to appropriately investigate your arrangement is principal. Now and again, what may appear as though a decent arrangement from the start may really cause monetary entanglements long haul. Likewise, whenever looking at least two potential venture openings, one property may appear to offer an incredible speculation in advance, while the other really offers the best return after some time. So as to reveal the most ideal venture bargains, submit the accompanying land contributing counts to memory:
Cap Rate
Net Operating Income / Total Price of Property
Example:
NOI: $25,000
Total Price (Purchase + Rehab): $300,000
$25,000 / $300,000 = 0.083 or an 8.3 Cap Rate
Rent/Cost
Monthly Rent / Total Price of Property
Example:
Monthly Rent: $1,000
Total Price of Property (Purchase + Rehab): $75,000
Rent/Cost = $1,000 / $75,000 = 0.0133 or a 1.33% Rent/Cost
Gross Yield
Annual Rent / Total Price of Property
Example:
Annual Rent: $9,000
Total Price (Purchase + Rehab): $100,000
Gross Yield = $9,000 / $100,000 = .09 or a 9% gross yield
Debt Service Ratio
Net Operating Income / Debt Service
Example:
NOI: $25,000
Annual Debt Service: $20,000
Debt Service Ratio = $25,000 / $20,000 = 1.25
Cash-On-Cash Return
Cash Flow / Cash In Deal
Example:
Cash Flow (Net Operating Income – Debt Service): $10,000
Cash Into Deal: $40,000
Cash on Cash: $10,000 / $40,000 = .25 or 25%
The 50% Rule
Operating Income X 0.5 = Probable Operating Expenses
Example:
Operating Income: $100,000
Operating Expenses = $100,000 * 0.5 = $50,000
The 70% Rule
Strike Price = (0.7 X After Repair Value) – Rehab
Example:
After Repair Value: $150,000
Rehab: $25,000
Strike Price = (0.7 X $150,000) – $25,000 = $80,000