All Forum Posts by: Albert Lubin

 Hi Joseph,

My credit is excellent (800+) but this would be my first investment property.

 Thanks for the prompt reply.

Apologies for not being clear enough in my original post. I did not do the analysis with their asking price. I was trying to back into the purchase price that would meet my requirements to submit an offer; so based on the rent roll provided, I estimated Opex to be 50% of the effective gross income, amounting to NOI being 50% of $112K therefore $56K. I want a better CAP rate than the market CAP of 8% so dividing $56K by 9%, I get $623K as the value of the property. Based on this value, the debt service would be $35.5K so CF would be $21.3K annually (over 10% ROI). With a $56K NOI and the asking price being $1.25M that would imply that the deal CAP is 4.5%. The location of the property is definitely not a low CAP market. How can I verify the Opex of the property prior to submitting an offer? I've read that sellers and their agents tend to underestimate the expenses so as a rule of thumb I read I should use 50%.

Hi everyone! I'm a newbie and I'm analyzing a 10-unit property to buy and hold. Based on my analysis, the recommended Purchase price is coming up way lower than the asking price. Am I doing something wrong? 

Below are the key data points:

- Gross Rental Income: $118K (I received the rent roll list from agent)

- Effective Gross Income: $112K (I'm assuming a 5% vacancy factor)

- NOI: $56K (I'm assuming 50% Operating Expenses - inclusive of 10% property mgmt costs, repairs & maintenance and CapEx reserves)

- Recommended PP: $623K (Market CAP rate is at ~8%; I used 9% because I want the Cash on Cash return to be 10%+ with a 30% DP at 7.2% interest rate and 30 yrs term)

- The asking price is $1.25M. What am I doing wrong? Or is the asking price ridiculous?

I welcome any insights so please help.