![]() Utilities included: $0 (you opt to require the tenant to pay directly).Property management fees: 12% ($1,728 per year).Maintenance and repairs: $2,000 (~14% of rents).After analyzing the local market, you come up with the following figures: Then you start doing your homework to estimate expenses. It rents for $1,200 per month, for an annual gross income of $14,400. But before making an offer, you run the numbers carefully. Suppose you find a rental property for $100,000, that you believe will generate a strong cash on cash return. The last place you want to find yourself is stuck with an investment property that costs you money each year, rather than earns it for you. It’s prudent for most investors to err on the side of caution by overestimating expenses. Investors can’t know the exact vacancy rate a given property will see next year, but by analyzing comparable properties, they can arrive at a reasonably accurate long-term average.Įven the concrete numbers like insurance premiums and property tax bills are subject to change. But others, such as vacancy rate, require an estimate. Some of the expenses above are essentially fixed costs, such as property taxes. ![]() It also ignores income tax implications (although it does include property taxes). NOI does not include financing costs such as interest.
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