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Updated about 9 years ago on . Most recent reply

User Stats

551
Posts
218
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Mike Hanneman
  • Investor
  • Coeur d'Alene, ID
218
Votes |
551
Posts

How to approach???

Mike Hanneman
  • Investor
  • Coeur d'Alene, ID
Posted

I found a 6 unit that "supposedly" gross 40K. So I ask for the income and expense statements, not sure what they are called in the real world, and the agent says that owner managed the property himself for the last 10 years so he has never drawn up any sort of financial statement. Goes on by saying everything is "straight forward, annual expenses run around 10k and includes taxes, utilities, and insurance." Continues by "his tenants have primarily paid in cash, so tracking is difficult."

I'm very interested in this property as the location is very good. How would you guys proceed to do your diligence with no facts in black and white?

Most Popular Reply

User Stats

144
Posts
73
Votes
Troy Gravett
  • Investor
  • Torrance, CA
73
Votes |
144
Posts
Troy Gravett
  • Investor
  • Torrance, CA
Replied

50% rule means your expenses should run about 50% of your income (and it will when you implement the proper operations). $495 x 6 x 12 = $35,640 gross income. subtract 5% vacancy and your effective income is $33,858. Take 50% of that and your NOI is $16,929. At a 10 cap the building is worth $169k.

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