Updated almost 9 years ago on . Most recent reply
Newbie question about NOI, Cap Rate and finding a good deal
Hi, Sorry for the newbie question. I just starting seriously looking into real estate investing about a week ago and have been reading and looking up as much information as I can. So the question I have is how come it doesn't appear that paying back loans / mortgages is considered when determining the value of a property? EXAMPLE: there is a property that I found for sale online which is listed for $220,000.00, The NOI is listed at $24,570 and the Cap Rate is listed at 11.16%. But assuming I put down 20% on the purchase that would leave me with a mortgage of of $176,000. Which comes to roughly $12,804 / yr so what I am actually looking at as profit for the year if everything goes perfectly (which I know is almost never the case) is about $11,766 is that correct? Which I then have to pay taxes on? It just seems like that is not much of a profit and would take me another at least 5 years to put a down payment on a similar property assuming i'm putting 100% of my earnings into savings. Again sorry for the newb question. I just want to make sure I'm doing my math correctly and get opinions if this is a typical looking deal in real estate? Would the above be considered a good deal? Thank you!