An exception would be more class A or B apartments where they are newer built in the last 10 years or so and rents are really high.So if you had say 40 units at 1,500 a door that is 60k a month gross potential whereas if you had 80 units at 400 a month low income tenants that is only 32,000.

The deal is as follows: Eightplex in Hickory NCAsking price $210,000 (trying to get it down to 150-170k, but am using 210k for the numbers) Gross rents: $2,900/month or $34,800/year (Between $330-400 a door) Tenants pay all utilitiesI am requesting a 1040 schedule E and the T12's from the seller, but for now am forced to use the 50% rule. using that, operating expenses are $17,400 NOI: $17,400Cap: 8.28 Debt Service: $8,700Equity Dividend rate: 16.5% The area isn't great or terrible, probably a C or C+ area.

Assuming 55% of gross income is going out to expenses (owner pays all utilities), then this has a CAP rate of 11.1%.

The calculation starts out with potential gross income.  

I recall the proforma on that property being somewhat odd --- maybe the stated gross income was too high compared to what the stated rent was?

Or should I should I show a business income (1120s) of a gross of 15k per month.

@Dan SmithHi Dan, no offense, but grossing $1,500 is not the same as positive cash flow.

@Daniel DietzYour analysis is in the right direction, but not quite there.1) Determine the debt financing ratio - in this case .602) 60% of the gross income is then looked at by UDFI3) 60% of all deductible expenses are applied, so 60% of straight-line depreciation, 60% of the interest on the note, 60% of property taxes, etc.4) $1000 exemption applies5) The net amount after deductions and exemptions is then taxable to the IRA, and the trust tax table is used to determine the tax amount.Even if you have a negative UDFI liability, it can be worth filing the 990-T in case you can carry that loss forward to future years.We have a UDFI calculator on our website and if you PM me, I can send a link to you (BP does not want me posting that outside content on their forums).

 Cash flow and gross rents are different things.

Gross rents will be over $2000 a month.