Could this be a good deal? - Posted by NB(ID)

Real Estate Investing
1

Posted by Tony_PA on January 29, 2000 at 21:08:04:

Side subject, but what is cap rate?

2

Could this be a good deal? - Posted by NB(ID)

Posted by NB(ID) on January 29, 2000 at 20:26:06:

Stats:
Asking price $79,000
Built 1946
Taxes $855.72
The loan of $31,619 with payments of $363.13 at 8% is assumable. Owner is requesting 25% down at 9 1/2% for 15 years.
Rents= $485(3BR/1 1/2B), $360(2BR/1B), $300(1 1/2BR/1B = $1145. Rent includes water, sewer and garbage.
The building needs some TLC.
The realtor sheet says bring offers. Out of area owner is having difficulty finding good management.
This property was originally a church and was very beautiful. This owner has NOT taken care of the property and it probably needs some improvements. How do I figure the cap rate on this property? Thanks very much.

3

Re: Could this be a good deal? - Posted by laser

Posted by laser on January 29, 2000 at 23:44:41:

Tony,
The Icome producing properties , we use Income approach,to figure out CAP rate, which requires 3 factors.
1)Net Operating Income: (gross rental - vacancy loses

  • Operating expenses)
    (1145x12 )- (5% vacancy rate) - (855.72
  • expences).
  1. Value of your property: $79000
  2. Cap rate: ?

the Cap rate is:
CAP rate = N.O.I / Subject property.

NOTE: Also , you can deduct , the Debt services ,
including:loan principal and capital expenditures
(improvement)from N.O.I. to get CASH Flow
before taxes.

Good luck,
Laser.

4

Re: Could this be a good deal? - Posted by Chris

Posted by Chris on January 29, 2000 at 22:05:39:

NB- Take a look at this article:

http://www.creonline.com/mm_28.htm

-Good Luck, Chris