Calculator results explanation

[Brad E.]

Hi, I am a total newb here but have been to a couple webinars and recently tried the rental property analysis calc.  When I get the results I end up with a bunch of numbers that I am not sure what exactly they mean - e.g. 'gross rent multiplier' or 'pro forma cap rate'.

So I was wondering if there is a guide here on the BP site that goes in to more detail on what some of these numbers mean in the context of rental properties?  I did a site search but didn't find anything meaningful.  

Hopefully I have posted this in the correct forum.  This site is huge!  Thanks in advance.

[George P.]

dont worry about those numbers. worry about the cash flow, and return on investment.

do you have a monthly cash flow of $300+? i'd take it. is it negative? run away!

[Brent Coombs]

@Brad E., "gross rent multiplier" just means: how long will your original purchase price take to be recouped with the gross rents payable? For example, I would certainly prefer a GRM of 4 years rather than 10 years! (eg. $25k/y rent on a $100k property rather than 10k/y)!

"Pro Forma Cap Rate" would be the GENERAL expectation within a specific market of how much NET annual income might be made off properties as a percentage of their purchase price (as if paid for by cash). If the figure arrived at is say, 10% "Capitalization Rate", which you might have set as your initial benchmark, THEN you would hone in on the SPECIFIC (Non-Pro-Forma) details about the property to see if that Cap Rate is justified by the current financials and building condition, and whether it's still a "deal" when LOAN repayments are added to the expenses side(?)

Hope that helps. Cheers...

[Brad E.]

thanks alot guys