Analyzing Numbers on a 4-Plex

[David Schulwitz]

Hey BP! I took a walk-through of a 4-plex in my hometown in Michigan a few days ago, and I've started to crunch the numbers based simply on the expenses and income listed on the listing. I would of course have to have these confirmed, but here's what I'm working with so far. I'm not sure what "miscellaneous" is, but I would have to pay for lawn, snow, and common area electric.

Still learning how to calculate CAP rate and Cash-on-cash return.

What do you guys think of the deal? Thank you so much ahead of time. Let me know if you have any questions.

I apologize if it's hard to see. Trying to figure out the best way to imbed a spreadsheet...

[Steve Babiak]

Here's the math since @Joel Owens has not answered yet:

NOI = total gross rents minus expenses

NOI = 26700 - (0.6 x 26700) = 10680

A 10 CAP would value the property at 106800.

A CAP of 8 would value the property at a higher number; a CAP of 12 would value the property at a lower number. That is because you divide the net operating income (NOI) by the sale price or value to get cap rate.

CAP = NOI / value

value = NOI / CAP

So, at 8 CAP, you have to solve the equation

value = 10680 / 0.08 = 133500

For 12 CAP,

value = 10680 / 0.12 = 89000

Hope that helps ...