This gives us our Effective Gross Rent. Potential Gross Rent: 1,200 per month, or 14,400 per year Less Vacancies: (720 per year) at a 5 percent vacancy rate Effective Gross Rent: 13,680 per year Next, well add any other income sources that are associated with the property, such as pet fees or coin-operated laundry income.Maybe the Answer Is That He Can't Divest
For the sake of example, lets say these expenses come to 6,180 per year. Gross Operating Income: 14,180 Less operating overhead: (6,180 per year) Net operating income (NOI 8,000 per year Congrats, you know your net operating income, also known as NOI.Zero cash flow deals
Start with The One Percent Rule : Does the monthly rent equal one percent of the purchase price or more? A 100,000 propertyshould rent for at least 1,000 per month. A 200,000 property should rent for at least 2,000 per month.Zero cash flow deals
You wont literallypay 50 every calendar year; youll enjoy years in which your repair bills are 0. But youll also experience years in which you spend 50,000 replacing the roof, windows, gutters, siding, appliances, deck and flooring.
This is a permanent cost associated with homeownership. Death and taxes, right? You dont subtract the cost of P I (principal and interest beca).
Many houses are vandalized and robbed. The tenant risk is higher, so your returns should also be higher. Demand at least the Two Percent Rule inthese areas. Why Use the One Percent Rule?
Lets say that this comes to 500 per year. Well add this to the Effective Gross Rent, and we now have a new yardstick: the Gross Operating Income. Effective Gross Rent: 13,680 per year Plus Other Income: 500 per year Gross Operating Income: 14,180 Next, well subtract theoperating overhead.