Cash Flow From Apartments
Hi, I am looking to get involved with commercial real estate, and was wondering what would be considered a decent cash flow/unit?
Also, for the type of market I am looking at investing in, 3-4 bedroom apartments would be most economical. the problem is, as most of you already know, most apartment buildings consist of 1 to 2 bedroom units; what could be done about this dilemma? Thanks!
-new guy-
Multifamily is 5+ units as you already know. The lender looks at the overall flow of the property and most like to have a DSR of 1:20, although some I'm aware of will take 1:15 or even 1:10.
so about 20% of NOI is a good cashflow figure? I see. I was hoping to be able to structure my deals to create a minimum of 1.25 DSR. does this sound feasible?
Pardon my ignorance, but what is DSR?
Here's my rough shot at it...
DSR = Debt Service Ratio
NOI = Net Operating Income
NOI is the rents received - all operating expenses (debt is NOT considered an operating expense.
DSR = NOI / Debt payment
Hope that helps,
Jeff
Or ... you might see it as DSCR or DCR!
So using the 1:20 desired ratio above, for a building with a monthly mortgage payment of 10,000, I'd have to have an monthly NOI of 200,000? I think that I missed something here - can someone clarify? Thanks in advance!
-e-
http://www.thecreativeinvestor.com/commercial/modules.php?name=News&file=article&articleid=467
Myfrogger - thanks. I misinterpreted an earlier posting. It makes perfect sense now.
-e-