Small Income Property Analysis and Investment Property Analysis Methods.

As a real estate professional, we also assist home buyers and investors interested in purchasing multi family properties for the purpose of creating passive income through rentals and create equity over time or through different means this Small Income Property Analysis information video could assist you with the basics to make a better informed purchase.

There are several approaches and analysis methods investors utilize to make sure they’re making a sound decision and the property meets their investments objectives whether they’re smaller investments, 2-4 units or larger properties.

I’m Roberto Sanchez with United RE and the Sanchez Realty Group, I’ll explain some of the most common methods use to analyze a property in frankly a few moments.

For the Sake of this illustration will use a 2 Units property with a purchase price of $300,000 and Rental income of $3,000 a Month.

The first analysis method commonly used is the:

1^st  Net Operating Income:

Gross Rental Income – Operating Expenses

Ex:  $3,000 x 12 months  – $11,000 = $36,000 – 11,000 or $27,000 NOI  (Before Mortgage)

2^nd Cap Rate:

Net Operating  Income / Total Purchase Price

Ex:  $27,000 / $300,000 = 9%

3^rd 1^st One Percent Rule:

Monhly Gross Rent >= 1 % of Total Purchase Price

Ex:  $3,000 >= 1% of $300,000 = $3,000

4^th Net Income After Mortgage (NIAM)

NOI – Mortgage or Finance costs

$27,000 – $12,900 (Principal + Interest) = $14,100

4^th Cash on Cash Return (CoCr or COC):

Net Income After Mortgage / Down Payment

Ex: $14,100 / $75000 = 18% COC

Other Methods are:

The Gross Rent Multiplier:

Total Purchase Price / Yearly Gross Rent

Ex:  $300,000 / $36,000 = 8.3

The 50% Rule:

It estimates the NOI at 50% of Gross rents

Ex: $36,000 yearly GR x 50% = $18,000.

I look forward to assist you with your investment purchasing needs, having a real estate professional and season investor might be your best asset in achieving your wealth building plans and remember you have to have a plan to succeed or plan to fail but I’d add a plan without execution is a failed plan.

Reach out by phone or email: Roberto A. Sanchez 973-216-194 Email: rsanchez@robsrealtor.com