Posted by Joe Eckburg on October 06, 2003 at 12:16:00:
Management fee? Vacancy/deadbeat factor? Deferred Maintenance besides cosmetics? Snow removal/lawn care?
Taxes and insurance based on your purchase price and your insurance agent’s estimate?
You are paying 25K per unit, for units that rent for 360/month. Is this acceptable to you?
Ask for the current owner’s P & L Statement.
Calculate your NOI (Income - All Expenses).
Use a cap rate you feel comfortable with. I wouldn’t do this unless it was 11 or 12%
Based on your numbers, 43200 - 2800 - 1600 - 5400 = $33,400. I would include 10% management, 10% vacancy/deadbeat, so the number would be lowered to $26,560. Based on a 12% cap rate, Value = $221,333.
I hope this helps.