Real Estate Investing Forums

Real Estate Investing => Rehabbing, Fix and Flip, Rental Properties => Topic started by: MetroInvestor on July 28, 2007, 12:08:18 pm

Title: What should I offer?
Post by: MetroInvestor on July 28, 2007, 12:08:18 pm
Here are the current numbers. If you were going to make an offer, what would it be and explain how you arrived at the numbers. Should I also consider spreading the operating cost between the units?

7 Unit Commercial Building - 3 Commercial [1 Rented & 2 Vacant], 4 Apartments [Rented]
Current Rental Income = $1,910.00
Potential Rental Income = $2,725.00 [Occupants in 2 vacant commercial units]
Operating Expenses = $8,800.00
Asking Price = $235,000.00

Building needs repair - Approximate repair cost $25,000.00
Title: Re: What should I offer?
Post by: REI4ROI on July 28, 2007, 04:08:49 pm
The way you have presented the scenario can be miscontrued---are the operating expenses estimates based upon annual numbers while the gross rents are monthly projections? 

I'm going to make this assumption moving forward and caution you on not basing your offer on future cash flow potential (the "now" cash flow is the only number that matters & is relevant). 

Assuming you have a handle on the NOE (net operating expenses) and know what the cap rate is, you can use this formula:

Value = Net Operating Income / Cap Rate

Regards,

Scott Miller