Are you a real estate investor, or just getting started in real estate investing, and want to know whether you are getting a good deal or overpaying for a property? Knowing how to analyze an investment property is the first step to making sound real estate investment decisions. We have put together an educational video so that you can learn how to analyze an apartment building.
At Sage Real Estate, your market leader in Long Beach fourplexes, we are dedicated to helping our clients buy and sell apartment buildings. We will be explaining how to analyze an investment property using our custom 5-2-1 formula.
Many investors we work with have the same questions:
There are two primary categories when considering purchasing an investment property:
1. Financial: What do the numbers look like? Will the property make me money?
2. Physical: What condition is the property in? Does it need work or is it move-in ready?
To analyze an apartment building, we have developed a custom, Sage Real Estate 5-2-1 Formula
5 Investment Property Calculations:
1. Gross Rent Multipliers (GRM)
2. Capitalization Rate (Cap. Rate)
3. Price Comparison (Price per foot and Price per unit)
4. Cash-On-Cash Return (What return are you getting on your money?
5. Debt Service Coverage (Does the property pay for itself?)
1. Property Value with GRM
2. Property Value with Capitalization Rate:
3. Property Price Comparison: Price per foot and Price per unit
These first three metrics are used for calculating property value.
The next two cover rates of return and debt servicing.
4. Cash-On-Cash Return: The income that the money you put into the property is generating for you
5. Debt Service Coverage: Does the property pay for itself?
2 Investment Strategies
1 Exit Plan
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