Multi Unit's Or Apartments, How Do You Evaluate?
I am in the process of looking for a Multi Unit or Apartment Building. I have a vague understanding of cap rate. I was wondering what is the best way to evaluate a Multi Unit?Apartment Bldg to see if its a good investment or not?
Any Thoughts? :-?
Cap rate can be found by dividing the net operating income (NOI) by the asking price ( or purchase price if different.) Usually 10% is a good number to work with. In hot markets or neighborhoods, less than 10% is often the case.
NOI is your annual gross income less any operating expenses such as taxes, insurance, maintenance etc. Your NOI figure does NOT include your debt.
hope this helps
Also,
it is extremely important to make sure that your noi can cover your annual debt payments to ensure a positive cashflow.