- Joined
- Sep 14, 2016
- Messages
- 42
@dpeacock IMHO, if net income before PM is $1400 and PM has a value of 10% gross rent then actual NOI is $960. So going-in cap of 1.54%. Really terrible. What about looking for a private investment in the area with an experienced developer if you want exposure to that local market? Nothing wrong with betting on massive speculative capital appreciation but good if it is backed by some income.
If your upper lending limit is 1.2 DCR, then your maximum loan on this property is $167,166. Fundamentals are whacked on this.
Hey Matt - this post really threw me for a loop - so I did some digging. When I said NOI - I am including the borrowing costs in there as well. The $1400 net for me was all of my borrowing costs + taxes + others less my total rent. I just noticed that NOI in the real estate world excludes the borrowing costs from that figure.
I just redid the calculations - omitted the borrowing costs - and our NOI is $3360/mo. ($4400 gross rent - $400 taxes - $440 PM fees - $200 insurance)
Does that make this deal make more sense? If I did it correctly, that would result in a DCR of 1.396 and a cap rate of ~5.3%
Lemme know!
Last edited: