Update Investors Checklist #102 (MA)

Property Analysis

Here’s an example of some Property analysis Guidelines, make sure you’re comfortable with the Guidelines YOU use! Mike

1.Price/Square Foot

2.Capitalization Rate

Cap Rate = Net Operating Income/Purchase Price (Value)

*NOI

Gross Rental Income (month)

  • -Vacancy
  • -Real Estate tax
  • -Insurance
  • -Maintenance
  • -Condo/HOA fee

NO PI!

NOI/month x 12 _____________NOI Annually

NOI/Purchase Price (Value) = Cap

3.Rate of Return

Net Income/Investment = RoR

4.Income Approach GRM

Monthly Rent/Value = GRM

285 Lynn Shore Drive Apartment #512, 01902 3 Rooms, 1 Bedroom, 1 F Bath 602 SF (April 17, 2020)

(7%, 30yr Fixed, 20% down = $984.12/month PI)

  1. Price/Square Foot

$184,900. List price/602. SF = $307/SF

There were 26 Sold Listings within 0.50 mile radius & within the past 6 months. $190-392k Average 903SF Average Sale $246,354.

$285./SF

2. Capitalization Rate

Cap rate = Net Income/Value

$2500. monthly rent

-$453. Condo/HOA fee

-$169.62 RE Tax

-$250. Vacancy & Maintenance

$1627.38 NOI/month x 12 = $19,528.56 NOI/year

$19,528.56/$184,900. = .106, 10.6 Cap

(Lower the Cap, Lower the risk, Higher the Cap, Higher the risk)

3. Rate of Return RoR

RoR = Net Income/Investment

$19,528.56/$36,980.00 (20% of $184,900. down payment) = 52.8% Rate of Return.

4. Income Approach – GRM

$2500/month/$184,900. purchase = 0.014 1.4 Gross Rent Multiplier. 1% is good in our area!

5. I like the Debt Service Ratio for quick numbers. It allows me to make Counter offers on the Spot! which is VERY Importante’!

Rent/Debt Service

$2500. rent/$984.12 PI +$435.Condo fee + $169.62 RE tax = 1.56 Quickly shows a bank you can make payments every month, collecting that rent!

 

This is also the Guide we use in Lesson #5 “Make an Offer” of Mike Hurney’s course “How to Become a Real Estate Investor in 12 Simple Lessons”

Last –  don’t forget our “4 Corners of the Box” Mortgage Guidelines

Reserves – 3 months PITI

High FICO credit score

Low LTV Loan to Value

Good DTI Debt to Income ratio

Get out there looking and make your own Good Luck! Mike

 

 

 

 

 

Mike Hurney
 

Mike Hurney is the Founder and Director of MassRealEstate.net, an Association of Contractors, Investors and Landlords. He is the Author and Coach of the popular Course "How to Become a Real Estate Investor in 12 Simple Lessons" which Trains and Guides Beginners or Sharpens and Challenges the Skill of Advanced Investors. Mike is a Successful Real Estate Investor, Rehabber and Landlord. He's also a licensed Real Estate Broker and Construction Supervisor. MassRealEstate.net PO Box 307, Marblehead, MA 01945 Office 781-405-1845 [email protected].net

Click Here to Leave a Comment Below 0 comments