Gross vs net income: how are these numbers?

Question

Eight total doors in Indiana. Gross annual rental income is $88,140. After insurance, tax, mortgage, and pm fees, net income is $40,057.
$24,540 annual in annual interest to the bank. That’s a lot of money to give away.
How bad is this deal? Still learning.

Don G. · Answer

$98,000 cash has been put into the properties (one duplex, one 5-plex, one 4 bed single family...three total properties)

Kim Meredith Hampton · Answer

@Don G. What is the price point on this property and what type of loan and down payment?

Basit Siddiqi · Answer

It depends on what you are spending on the deal.Sounds like it is about 50% expense ratio at 54.55% which I think is along with industry standards.The net income looks like its $23,543 for the seller.What is his interest rate?Can you get the same interest rate as him or better?The potential issue is that he may have gotten his interest rate when rates were lower and you may get the deal at a higher interest rate which can potentially have the deal at break even or at a loss.The quality of the deal will depend on what your net income is and what you are putting into the deal.If in the above example and you have the same net income, the deal sounds amazing if you are putting in $200,000 because you have a 10%+ rate of return.But if you are putting in $2,000,000 the deal is horrible because you are making 1%