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

 

 

 

 

 

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