Trying to project a cash flow is a little riskier than working with the actual figures recorded for a property for a certain period of time, and usually this is because every property is different. Certainly you’ll pay more for “snow removal” with a property in a northern state than in a southern one. On [...]
If appraising a property is how you can determine what it’s worth, then analyzing the cash flow is how you can tell if you can afford it. Now you’re going beyond computing the net operating income. Now you’re going to have to see whether you can still meet the mortgage payments after every other expense [...]
This is called the Net Income Method, and it is used primarily for larger, multi-unit buildings and complexes, generally consisting of eight or more rental units. The is method is related to the Gross Income Multiplier Method, explained earlier, but now each property is evaluated for its net income. In simple terms, after all the [...]
Each real estate investor must understand the second appraisal process method referred to as the replacement cost analysis because it evaluates the value of a property by what it would cost to rebuild or replace it with another very similar structure. Cost of the land and/or site is added to that replacement value, while any [...]
The method of appraisal becomes a little more involved when you start to compare larger income-producing properties, such as multi-apartment buildings or multi-building complexes. Commercial and industrial properties are even more difficult to compare because many of these structures are unique. With apartment buildings, however, there are a few consistent measures you can rely on. [...]
PROPERTY UNDER CONSTRUCTION:
Address:______________________________ Category: __________________
City, State, Zip: ___________________________________________________
INCOME:
1. Estimated Yearly Income (Gross) ___________
2. Other Income ___________
3. Total Income (Gross) ____________
4. Less Allowance for Vacancies ____________
5. Total Income (Effective Gross) ____________
EXPENSES:
6. Advertising ____________
7. Auto (costs of transportation) ____________
8. Taxes ____________
9. Insurance ____________
10. Licenses ____________
11. Accounting & Legal ____________
12. Utilities (Gas) ____________
13. Utilities (Electric) ____________
14. Utilities (Water [...]
The first appraisal method has to do with price comparison. A convenient way to estimate the value of one house, for example, is to take an average of what all other similar houses have sold for in the same neighborhood. But again, only by taking into consideration the element of time. Certainly a house on [...]
