All Forum Posts by: James M.

Hey everyone, so I need a little assistance understanding how BP's calculator is crunching their number on NOI. While trying to further enhance my analysis, I was running my own analysis compared to BP'S and I am having trouble understanding how they are getting this NOI. I will list some numbers below.

Gross Annual Rents: 60,600

P&I: 2881. 20

PMI: 100

Monthly Expenses

Vacancy: 252.20

Cap Ex: 252.20

Misc: 150

Repairs: 101

Water/sewer: 100

Insurance: 87

Property Tax: 740

Total: 1682/mo

Here is how I've calculated NOI:

Annual Gross Income - Annual Expenses = NOI

60,600 - (1682x12) = 40,416

The BP calculator is showing an NOI of 39,204.00.

With that being said, what the heck am i calculating incorrectly??

I deallt with a similar situation down here in Southern California. My real estate agent who was savvy was trying to tell me the same thing. And yes it is true you will get money back at tax time due to depreciation but I personally do not calculate that into my analysis of a property. On top of that, you are now adding income from the property on top of your already high income, so who knows what your tax situation truly looks like unless you sit down with a CPA. I have never heard of anyone calculating an roi based on an expected tax return. For the most part here in California, the only way I can find any deals are those with some sort of value add. With all that being said, given our soft current market, if we do pull back a bit, now your depreciation isn’t what you originally expected either.

@molly, I heard the same Podcast and was also curious. I own a duplex here in Southern California and I’m looking to do the same thing for water, but for some reason I thought I read a while back that you couldn’t do this in California(not surprised)

Anthony, I am by no means a professional analyst, but I have run enough analysis and being a owner/property manager who does all his own maintenance, and repairs, and I would advise you to listen to your gut, and run the number from a conservative position. Sellers will make those numbers look as good as possible to you. Quite honestly I never even look at what the seller discloses for maintenance during my initial analysis. I run my own numbers from a conservative and aggressive position to understand my conservative upside and my greatest potential upside, and then compare to a sellers disclosed pricing and 9/10 times my number are far off theirs

Hey Dane, 

I think like others are mentioning, more information is need. I dont know the salt lake market at all, but I do know it is growing, which is definitely a plus for you. Its hard to understand if this is a good deal, without knowing your intentions. At face value, I dont like the deal, but if you are planning to rehab, and the ARV is much higher, and you can get top dollar for rents, who know, the deal might look ok, but im looking at this from the surface. I crunch your numbers on my excel sheet and here is what I got.

purchase325,000 

Down: 3.5% = 11,375

Closing: Roughly: 5,000

Repair cost: 5,000 (All units need some sort of love.)

Gross Monthly Rent: 2000 (assuming the numbers you gave)

Expenses

Mortgage: 1,497

Tax: 604 (I think Salt lake is 2.2%)

Insurance 2%: 55

water: 50

Gardener, snow removal, etc( 100)

Cap X 6%: 120

Maintenance: 100 (50/unit. I always just assume this when under writing)

Vacancy 4%: 80

Cash flow: -656/mo

Even assuming the market appreciates 4% per year and income increase every year, the numbers still would not work for me.. 

This is down and dirty, a lot more to it. Like i said this is just from the surface. 

Rich dad poor dad, abc’s of real estate, cash flow quadrant... all books for a great foundation for investing and being financially sound

@nam Hong. I can’t tell you what that would be in NJ, but in California I’d personally budget 3500-5k. As far as removing lather and plaster, just dry wall right over the top. No harm in doing it that way

David Waddleton There are properties in LA which make sense but as just about every podcast I listen to states, they aren’t going to jump out at you. You’ve got to make the deal work whether it’s negotiating the price of the home, rehabbing, raising rents, etc. I’m not sure your investment strategy, but personally I’d rather the appreciation and equity I can build in CA overtime rather than a 12% ROI like the Midwest.

Great story and beautiful home!

I’ve always called on the phone and more or less told them that another applicant was selected. I never get into detail and I always do it over the phone so I don’t have anything in writing.