• 30 Sec Real Estate Analyzer

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    • 30 Sec Real Estate Analyzer

      Use this calculation to help narrow down properties that should get a 2nd review. If the answer is "green" or "yellow" then consider a second review, while a "red" indicates a strong likelihood that you should not proceed.


      Purchase Price:
      Monthly Rent:
      ANSWER
      0

  • Gross Rental Multiplier

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    • Gross Rental Multiplier

      This calculation is a general tool for ascertaining value. If the GRM is way out high or low compared to recent comparable sold properties, it probably indicates a problem with the property or gross over-pricing.



      Example:
      1. Market Value / Annual Gross Income = Gross Rent Multiplier (GRM)
      Property sold for $750,000 / $110,000 Annual Income = GRM of 6.82
      2. Suppose you did an analysis of recent comparable properties and saw that their GRM's averaged around 6.75. You then approximate the value of the property being considered for purchase. You know that its gross rental income is $68,000 annually.
      GRM X Annual Income = Market Value
      6.75 X $68,000 = $459,000
      3. If it's listed at $695,000, you may not want to consider it for purchase.

      Comparable Market Value:
      Comparable Annual Gross Income:
      Annual Income:
      Market Value:
      ANSWER
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  • Net Operating Income

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    • Net Operating Income

      Start by determining the Gross Operating Income (GOI) of the property, which is Gross Potential Income - Vacancy and Credit Loss = Gross Operating Income. Then determine the operating expenses of the property. Subtract the operating expenses from the Gross Operating Income to arrive at the Net Operating Income.



      Example:
      1. Determine the Gross Operating Income (GOI) of the property:
      Gross Potential Income - Vacancy and Credit Loss = Gross Operating Income
      2. Calculate the operating expenses of the property. This would include expenses for management, legal and accounting, insurance, janitorial, maintenance, supplies, taxes, utilities, etc.
      3. Subtract the operating expenses from the Gross Operating Income to get the Net Operating Income.
      Using the example of a property with a gross operating income of $52,000 and operating expenses of $37,000, the net operating income would be:
      $52,000 - $37,000 = $15,000 Net Operating Income

      Gross Potential Income:
      Vacancy and Credit Loss:
      Operating Expenses:
      ANSWER
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  • Break-Even Ratio

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    • Break-Even Ratio

      Add the Debt Service to Operating Expenses and divide by Operating Income.



      Example:
      1. Determine the debt service for the property. Assume an annual debt service of $32,000
      2. Determine the annual operating expenses for the property. Assume that management and direct operating costs annually are $47,000.
      3. Calculate the annual gross operating income of the property. Assume a gross operating income of $98,000 annually.
      4. Add Debt Service to Operating Expenses and divide by Operating Income:
      $32,000 + $47,000 / $98,000 = .81 or an 81% Break-Even Ratio.

      Debt Service:
      Annual Operating Expenses:
      Gross Operating Income:
      ANSWER
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  • Gross Potential Income

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    • Gross Potential Income

      Gross potential income is the expected income a property will produce without deductions for expected vacancy or credit loss.



      Example:
      1. 3 units * $700/month = $2100
      2. $2100 * 12 = $25,200
      3. 3 units * $800/month = $2400
      4. $2400 * 12 = $28,800
      5. $25,200 + $28,800 = $54,000 Annual income. This is the GPI.

      # of Units Type 1:
      Monthly Rent Per Month for Type 1:
      # of Units Type 2:
      Monthly Rent Per Month for Type 2:
      ANSWER
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