Now it’s time to assess the expenses and get as close as you can to the actual numbers. Putting rough numbers on paper helps you come up with a clearer picture of what your offer should look like. I’ll walk you through calculating the expenses, NOI, capitalization rate, and loan payment and profit.
In a good Deal, the numbers work. Most new investors decide if a property is a good deal based solely on the pro forma. While the pro forma is a good starting guide, you should always trust, but verify. This is one of the most important parts of the whole process; it is only a good deal if the actual numbers maintain cashflow. You should not be feeding a property money every month hoping rent will increase. Get ready for some math!
A champion and advocate for entrepreneurs and real estate investors, Ken has spoken worldwide at top industry events. With media appearances on television and radio, Ken also host Entrepreneur Magazine’s Real Estate Radio program, where he helps listeners navigate the financial and legal arenas of real estate.