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Still Investing? Here's How To Calculate Real Estate Rates of Returns
Looking for investment properties to add to your portfolio? Contact DMK Realty in Darien, Connecticut for local knowledge and experience. 
DMK providing step by step real estate assistance for buyers, sellers, builders, landlords and tenants.
 How To Calculate Real Estate Rates of Returns
Calculation Reference Sheet
 
Gross Operating Income (GOI)
This is a calculation of the total potential monthly rental income (also known as gross rents or gross potential income). Remember if a vacancy reserve is not included in the expenses, it should be subtracted from the total potential rental income.
Net Operating Income (NOI)
This is a calculation of gross operating income (GOI) minus expenses
                NOI = (GOI)-Operating Expenses
           
Cap Rate (Capitalization Rate)      
                (NOI) divided by (Purchase Price) = Cap Rate           
This a calculation of the yearly net operating Income (NOI) divided by the value, or the purchase price.
 
Debt Service Ratio (DSR)
This is a calculation of the NOI, divided by the debt service, or mortgage payment(s). This number must be greater than 1.2     
                (NOI) divided by (Mortgage) = (DSR)
Cash Flow
This is a calculation of the (NOI) minus the debt service, or mortgage. Take this number multiply ... more

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