How do you know that the figures your analyzing are correct/realistic?

3 Replies

This may is mostly regarding expenses, but extends to whatever figures you have to rely on someone else's (especially the seller's) info.

@Payton Gonzales Figure 50% for expensense no matter what the seller reports...When you institute this rule of thumb, you can't go wrong.  I always use 50% even if the seller reports a 30 to 40 expense ratio.  At the very least the difference can go into reserves for repairs, which are usually not reported or under-reported.  

This is what I do..I take the gross rent, factor in the vacancy, then take 1/2 of that number as my NOI....then I look for a 10% cap rate and DSCR of 2 to 1.... This is a good deal in my opinion, and the banks like it, you'll like it, and you will make money.

@Payton Gonzales

This is what the due diligence period is for. Call the utility companies, (electric,water ,gas,etc.)

Check the rent rolls, check the leases, check the rental rates. NEVER rely on the seller or realtor for this information. They have been known to stretch the truth 

Hi Chadd and Steve,

Really the feedback. Will definitely do my own due diligence and appreciate you pointed me in the correct direction to do so.