In this quick presentation you will find out on how to calculate and evaluate a real estate project

1. How Do I Determine the Value of
a Property?

2. How Do I Determine the Value of
a Property?
You will Need 2 out of 3 Components to Complete the Equation

3. How Do I Determine the Value of
a Property?
You will Need 2 out of 3 Components to Complete the Equation
• Net Operating Income (NOI)
• Capitalization Rate (CAP)
• Purchase Price

4. IRV
CURVE Income
(NOI)
I
R X V
Rate
(CAP)
Value
(Price)

5. Definitions!
• NOI - Net Operating Income
• GPRI - Gross Potential Rental Income
• GOI - Gross Operating Income
• DSCR - Debt Service Coverage Ratio
• CADS - Cash After Debt Service
• IRR - Internal Rate of Return
 Cash On Cash-Return on investment

6. Here is a simple example using
$1,000 a month rent
$1,000/mo rental income
X 12
= 12,000 GPRI
-1,200 10% VACANCY
= 10,800 GOI
-4,320 40% EXPENSE
= $6,480 NOI

7. $6,480 divide by 10% cap rate
to get the maximum purchase price of
$64,800
25 yr mortgage at 5%
25 yr. arm = $380/mo
= $4560/year.

8. $6,480 - $4,560 = $1,920
So the annual profit is
$1,920
So now we take our yearly profit is divided
by our yearly mortgage to give us our
Cash on Cash return
$1,920 / $4,560 = 42.1
42% Cash on Cash Return

9. Now let’s us a real example of some
Orlando condos that students have
bought.
Denisa bought this Lakefront Condo for
$20,000 and she gets $650 a month rent.
Lets run the CAP

10. Denisa has $650 a month rent
$650 * 12 Months = $7,800 GPRI
$7,800 * 90% = $7,020 GPI
$7,020 * 40% exp. = $2,808 Expenses
$7,020 - $2,808 = $4,212 NOI
NOI =$4,212 / 10% CAP
= $42,120 Purchase Price

11. So with a $650 rent Denisa can buy this
condo for $42,120 and make a good profit.
Denisa paid $20,000 for the condo so her
CAP Rate is $42,120 / $20,000
Or 21 CAP
Now let’s work on the Cash on Cash

12. Now let’s work on the Cash on Cash
Cash on Cash is based on the
Monthly profit / Monthly Mortgage
Denisa gets $650 a month rent and paid
$20,000 for the condo.
So we get a mortgage at 5% for 25 yrs.
$116.92 for a monthly payment
Here is a mortgage calculator you can use
http://www.moneychimp.com/calculator/pop
up/calculator.htm

13. So we have $650 Rents
Expenses
HOA $275
Taxes $50
Mortgage $117
Total Expenses $442
So monthly profit is
$650 - $442 = $208
So Cash on Cash is
$208 / $117 = 178%

14. Example 2
Jason bought this condo for $25,000
And it rents for $700
So let’s run the numbers

15. Jason has $700 a month rent
$700 * 12 Months = $8,400 GPRI
$8,400 * 90% = $7,560 GPI
$7,560 * 40% exp. = $3,024 Expenses
$7,560 - $3,024 = $4,536 NOI
NOI =$4,536 / 10% CAP
= $45,360 Purchase Price

16. So with a $700 rent Jason can buy this
condo for $45,360 and make a good profit.
Jason paid $25,000 for the condo so her
CAP Rate is $45,360 / $25,000
Or 18 CAP
Now let’s work on the Cash on Cash
$25,000 for the condo.
So we get a mortgage at 5% for 25 yrs.
$146.15 for a monthly payment

17. So we have $700 Rents
Expenses
HOA $250
Taxes $60
Mortgage $147
Total Expenses $442
So monthly profit is
$700 - $457 = $243
So Cash on Cash is
$243 / $147 = 165%