How to Calculate – Cash Needed – Closing – Holding – Equity Profit
Monday, March 07
Cash Needed (All In Closing) – The Total Cash needed to purchase property and rehab. Purchase Price- Flip Mortgage Loan Amount+ Repairs+ Closing Cost Amount---------------------------------------= Cash Needed (all in closing)Cash Needed (Holding Cost x Mos.) – The Total Cash needed to mainta...
How to Calculate Net Yield
Sunday, March 06
Net Yield – Measures yearly cash flow to the after repair value (ARV). This metric takes into account all of the expenses including the debt service. Yearly Cash Flow÷ After Repair Value------------------------------= Net Yield $29,832÷ $2,000,000------------= 1.49%
How to Calculate Debt Yield
Saturday, March 05
Debt Yield – Measures yearly net operating income (NOI) to the loan amount. This metric is used to determine the risk of a loan. Provides lenders a measure of risk independent of interest rate and amortization periods. Yearly Net Operating Income÷ Loan Amount------------------------------= D...
How to Calculate Debt Coverage Ratio
Friday, March 04
Debt Coverage Ratio – Measures cash flow by comparing net operating income (NOI) to the debt service (PI). A DCR (also known as DSCR debt service coverage ratio) of 1 means you have an equal amount of income and debt which leaves no room for surprise expenses. A ratio greater than 1 like 1.2 me...
How to Calculate Break Even Ratio
Thursday, March 03
Break Even Ratio – Measures what occupancy percentage of the property must be rented to cover all expenses including debt service. Loan Principal & Interest+ Taxes+ Insurance+ Property Management+ HOA+ Other Expenses÷ Gross Income------------------------------= Break Even Ratio $82,...
How to Calculate Gross Rent Multiplier (At Purchase)
Wednesday, March 02
Gross Rent Multiplier (At Purchase) – Measures the purchase price to its annual gross income. The GRM is the number of years it takes to pay for the purchase price via gross income. Purchase Price÷ Gross Income (1st Year)------------------------------= Gross Rent Multiplier (At Purchase)$1,...