What is cap?

Capitalization rate:  It is simply the rate of return on an investment property.  How fast you earn your money back.
this is also called return on investment (ROI) in non real estate endeavors.

And we'll go ahead and let you know.. the numbers at the very bottom of the sheet, Profit and loss, P&L is the good stuff. That one number will tell you if this property will likely be profitable for you. If the numbers are above 10%..this is a good deal.

We're laying out all of these details, so you can double check our math, and see where the numbers are coming from.  You can also that this information and remix it in your own calculations, and we're happy to help you understand each property well so you can make the right investments.

Now, the first few rows are the basics, to help you understand the property. Number of units, age, square footage, bedrooms and bathrooms per unit..

but then we get to the good stuff.   Our suggested price is just that: what we believe you should offer, in order to get a high cap rate/ROI.  and the list price is what the owners have formally listed as the price.

If list price, and suggested price are the same..it's a good deal, and is likely to get above average returns

The rehab costs are what we estimate, after sending a maintenance professional to evaluate the property.  This inspection cannot be as detailed as a full home inspection, but will be our best guess based on what we've seen needs to be done to the property. We'll be including relevant pictures of the areas in need of repair, and this should be a good starting number for estimating the total cost of the property, but remember, this is not a bid, and a formal inspection can turn up things we were unable to see in a quick go through.

The next couple of rows, Net investment simply say how much you'd be paying including estimated rehab costs at both the list price, and our suggested price.
and now we move on to Income for the property.

The actual monthly rent is the real rent, if available, paid by current tenants.
the market rent is what we estimate rents should be, if the property is unoccupied, or, we sometimes add this if existing rents are unusually low.

Occupancy status will tell you if the property is occupied, or vacant,

and we assume a general 93% occupancy rate when doing the math for later calculations.

Gross actual yearly rent , and gross market rent is just there for convenience, it's the rents, times 12 months, if the property is occupied 93% of the time for each row.

 Next up are the expenses.

This is the other half of ROI. Income minus expense divided by expense..  we're factoring in as much detail as we can to help you make the right decision.

A large part of what we do is property management for investors large and small, and we charge a flat rate 8% of rents. If your property management company is high cost, give us a call and we might be able to help.

we'll go ahead and add in an 8% property management cost for our projection, based on both actual, and market rents.

a good back of the napkin estimate is to assume one months rent in repairs each year, so we'll include that.

as an investor, you know that insurance rates can be tricky, and vary widely, but we'll use $650 yearly for single dwellings, and $1100 yearly for multi unit cost estimation.

HOA home owner association fees are a rarity, but we'll list them here if we see any.

The annual property tax comes straight from the county auditor's website.
Utilities are often a point of negotiation between landlord and tenants. Do not forget that this can be an expense if you decide to pay utilities,and change your calculations accordingly. We list this at $0 as a placeholder.

Other lists any other expenses we're aware of,  as an example, some townships here require trash fees, the larger city does not.  We'll list these if they apply to the property.

Finally, Profit and loss, the good stuff.

Here you'll see the total for net income (income minus expenses) at listed price for the property, and also, suggested price.

and then you'll see the Cap calculation results themselves.
Remember each is the cap rate/ROI expressed as a percentage of return, for each different scenario we've considered above.  These cases are list price vs. suggested price, and actual rent vs. market rent.

This can be a little confusing, so we'll go over each in order.

row 33 is net (actual rent) income divided by net investment at list price.
row 34 is net (actual rent) income divided by net investment at suggested price

so the first two are all about the actual rent today, both list and suggested.

the next two discuss market rent.

row 35 is market level net income divided by net investment at suggested price
and row 36 is market level net income divided by net investment at list price.

If you'd like to discuss anything on this page, we're happy to talk, and can get you the data you need to make these complex decisions, and help at any step of the process of investing in single family units, as well as small and huge apartment blocks. We're driven to get you the real estate income you need, and take care of the hassle for you.

Remax incline has years of experience and skill in real estate sales and management to offer, and we'd love to assist you.   513 921 9560 x 200, or inclinehome.com.

Thanks for watching.