• Rent Income is $1,000 a month
First: • Figure out the net operating income (NOI) for the property you are analyzing. This is the amount of money you’ll make AFTER expenses. • List out all of your MONTHLY operating expenses. This should include, but may not be limited to: taxes, insurance, repair costs, and any other expenses you know or think you might have like management costs and planned vacancy. • Subtract your expenses from your monthly potential rent that you will collect from the tenant: $1,000 - $100 - $300.10 - $70 - $70 - $100 - $100 - $50 = $209.90 (This is your net operating income.) • Multiply the NOI by 12 (months a year), this equals $2,518.80. --->($209.90 x 12 = $2,518.80) • Divide the yearly NOI ($2,518.80) by the amount of cash you are putting down on the property ($25,000) which equals 0.100752 ---> ($2,518.80 / 25000 = 0.100752) • Finally, turn 0.100752 into a percentage (.100752 x 100) = 10.08% cash on cash return. I don't know about you, but a lot of my clients would love this scenario! 10%+ return on their cash investment. It's important that you determine what PERCENTAGE of return you want on your money! Then run the numbers and play with them until you find the offer price that's right for you and gives you the return you need. Another way to calculate the numbers is below: Calculating your Return on Investment (ROI) when paying all cash . Here’s how to do that: 82
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