# of Units32Rent per Unit$485Gross Rents$186,240Other Income$0Gross Potential Income (GPI)$186,240Vacancies Assume 10% vacancy rate $18,624Effective Gross Income (EGI) $167,616# of 4-Plex8Price/4-Plex$120,000Sales Price$960,000Acquisition Cost Assume 20% down pmt + 5% other$240,000Property ValueNOI/(Desired Cap Rate)$931,200Operating ExpensesRule of thumb is 50% of Gross Rents (assuming tenants pay utilities) $83,808Capital ExpensesUnknown (owner says 0$)$0Net Operating Income (NOI)EGI - Expenses$83,808Debt Services$75,396TaxesAssume 1.25% of property sale price $12,000Insurance Assume 1% of property sale price $9,600Net Cash Flow-$13,188Debt Coverage RationNOI/(Debt Services) 1.11Capitalization Rate (Cap Rate)NOI/(Sales Price) 9%Gross Rent Multiplier (GRM) 5Cash-on-Cash Return (CoC)(Net Cash Flow)/(Acquisition Cost) -5%

@Ben GriseDo you operating expenses include:a) Allowance for maintenance: 10% gross revenue;b) Allowance for PM: 7 - 10% grossYou should also make an allowance for vacancy (8.33 - 10%) in your revenue projections:i.e.

The step-up basis rule applies to inherited property that's includible in the deceased's gross estate, whether or not a federal estate tax return was filed, and it also applies to property inherited from foreign persons, who aren't subject to U.S. estate tax.

I will be keeping 6 months of mortgage payments plus 20% of gross rents a month aside.

The 50% rule is just a rough-and-tough way of figuring out the NET INCOME that a property will generate, which is entirely separate from debt service.Take the gross rent, divide it in half, and that's your Net Operating Income (NOI), which is what you have left after paying all expenses (except debt).

I'm not a home owner (31, have a couple good friends as roommates and pay $300 monthly, so it's hard to justify right now), but I've heard of both mortgage interest and depreciation being deductible.I don't quite grasp the true benefit as far as what it does to your adjustable gross income, however, and was wondering if someone might share an example.

I was guitly of the old Gross Rents - PITI = Cash Flow equation at one time!

Some will pay a 3% cap in trophy "A" areas or 10% +cap in a tough area ( I am assuming this is in So Cal.)Just to be clear is the gross annual income $81,300with $35,450 in expenses for an NOI of $45,850 ( which is a 5 cap)Or is The gross annual income $116,750 = $81,300 + $35,450 (9% cap)

That rule says 50% of gross schedule rents go to capital, expenses and vacancy.

I would appreciate your feedback on this commercial multifamily opportunity I am evaluatingYTD Rental Income $57kYTD Expenses including water, taxes, Insurance $27kNOI $30kThe property is currently being mismanaged, potential gross income is approx $13k.Would a financial institution look at this opportunity favorabily; would they look at the current/potential rent roll and P&L statements to make their decision?