Other formulas suggest applying a fixed profit target to the purchase price (i.e. instead of a 0.7 multiplier, calculating the ARV and subtracting repairs costs, profit, and carrying costs, etc. separately).

But your cash-on-cash return drops dramatically while you tie up that money that could be going into another deal thereby multiplying your asset base.

Divide total monthly rent by 2% (or multiply by 50), then subtract any repairs needed, and you have your maximum purchase price.

An easy way to remember cap would be to take the NOI and multiply by 10 to create a 10 cap and thus (in this market) USUALLY the max you'll want to pay for the park.

(Quad) Property(Quad) PropertyBeds/Baths: 8 / 6Beds/Baths: 8 / 6Type: Multi-FamilyType: Multi-FamilyYear Built: 1980Year Built: 1980Square Footage: 2,813Square Footage: 2,813Lot Size: 0 sq ftLot Size: 0 sq ftParking: On-StreetParking: On-StreetMLS #: undefinedMLS #: undefined** Purchase **** Purchase **Purchase Price: $180,000 ($64/sq ft)Purchase Price: $235,000 ($83.5/sq ft)Purchase Costs: $3,600Purchase Costs: $4,700Rehab Costs: $0Rehab Costs: $0** Financing **** Financing **Down Payment: $45,000 (25%)Down Payment: $58,750 (25%)Mortgage Amount: $135,000Mortgage Amount: $176,250Total Cash Needed: $48,600Total Cash Needed: $63,450** Cash Flow (Monthly) **** Cash Flow (Monthly) **Rent: $3,200Rent: $3,200Vacancy: -$320 (10%)Vacancy: -$320 (10%)Expenses: -$1,343Expenses: -$1,343Net Operating Income: = $1,537Net Operating Income: = $1,537Mortgage Payment: -$684Mortgage Payment: -$893Cash Flow: = $853 ($213 per unit)Cash Flow: = $644 ($161 per unit)** Returns **** Returns **Cap Rate: 10.2%Cap Rate: 7.8%Cash on Cash: 21.1%Cash on Cash: 12.2%Return on Investment: -102.5%Return on Investment: -169.8%Internal Rate of Return: -94.7%Internal Rate of Return: -100%Rent to Price: 1.8%Rent to Price: 1.4%Gross Rent Multiplier: 4.7Gross Rent Multiplier: 6.1

Then take that # and multiply it by about .65 to give you an approx on the most an investor should roughly spend if flipping or wholesaling it.  

Well, the rub is that the builderdeveloper is probably trying to sell the building to some fund or investor and if you multiply that extra $200/month in rent by a 5% CAP rate they (the builder/developer) will net roughly an extra $50K in additional sales price when they sell.  

Don't get too focused on cap rates and gross rent multipliers. the thing you want to focus most on is cashflow, how much cash it puts in your pocket per month.

Joe,As long as you have a scope of repairs, can use a tape measure and can multiply you can get a HomeTech book (google them, no available in stores) and use it to get a bearing on your estimates.

I have typically seen expenses run 35% of gross rents so I multiplying gross rents by 50% is a very conservative estimate.