noi*10 = purchase price ?

[Kay Ferdous]

Has anyone heard of this rule of thumb formula when purchasing 5+ unit multifamily buildings? Investor I recently spoke to uses this formula to filter properties. What do you guys think.

Noi*10= Purchase price?

So if my NOI is $30000. Purchase price under $300k is worth looking into.

[Brandt Smith]

@Kay Ferdous what you are talking about is the cap rate. This is essentially how much investors expect to get in return for their investment based on the perceived risk. NOI/Market value.

The cap rate changes depending on your market, sub market, class of building, etc....

Used in reverse, you use the cap rate to determine the purchase price. NOI * Cap Rate = Purchase price.

I highly recommend reading several books on multi family investing before buying. Don't take this as an insult, but your question was really basic for MF investing and tells me that you have a lot of knowledge to gain before you are ready to take that step. Please take the time to build your foundation or you will crash and burn. I would hate to see that happen!