The NOI, based on the forecast provided by the on-site management (extrapolated from previous years), is $220K, though this is after $60K in management overhead has been subtracted.

Your calculation of cashflow at 45000 was $20 off ($400-$342=$58) and if you subtract the $50 for taxes you end up with $8 a month.

Anyway, the correct way if your valuing by the income approach is to take the total yearly gross income, subtract all of the expenses except debt service (principal and interest payments).

Find out the market rent (you have no control over this), subtract the expense, subtract your desired profit and then you have the max payment.

So, if I have $15,000 into a deal, and I could get 5% for CDs, I'll subtract off $750/year in opportunity costs.

So 70% of $111,000 is $77,000.We then subtract from $77,000 the repair costs.

Rental Income = 1200 (seller said he had it at 1400 before) Expenses: Mortgage - 335.62 Taxes - 396 (gross I know) Maintaince - 25 Repairs - 80 Total -- 836.62 Rent Income less expenses = 1200 subtract 836.62 = 368.38.

But then payment on a 20 year, 8% loan is $3187/month, or 662 in the hole.If I wanted to get $700/month in cash flow, I'd subtract that $700 from the $2625 NOI to get $1925.

So I checked out the income for the previous 3 years, subtracted their 45% and then simply deducted my carrying costs from the remainder and it was a number I was happy with.

If you want an assignment fee, you'll need to subtract that off, too.A lease option is going to have an option to purchase.