STRATEGY
CALCULATIONS
10 Real Estate Calculations Every Investor Should Know UNDERSTAND THE MATH BEHIND EVERY DEAL.
by Andrew Syrios
I
n real estate, not everything will fit into a neat little box. Creativity is a must. However, there is indisputably a mathematical side to successful real estate. Sooner or later, you must put pen to paper and figure out if it makes sense to buy a particular property. These 10 key calculations will prove vital to your ability to analyze potential deals.
What you need to know: • Cheaper properties have higher rent-to-cost
• Use this to compare properties, not make a final decision • Buy-and-hold investors should look for a value greater than 1 percent
NO. 1 RENT-TO-COST
Monthly Rent / Total Cost (Purchase Price + Rehab + Acquisition Costs) Example: Rent = $900/Month Total Cost = $75,000 Rent to Cost = 1.2% ($900 / $75,000) When to use it: If you need to quickly determine if a potential rental is worth evaluating further.
NO. 2 GROSS YIELD
Annual Rent / Total Cost Example: Rent = $900/Month, $10,800/Year Total Cost = $75,000. Gross Yield = 14.4% Gross Yield ($10,800 / $75,000)
34 | think realty magazine :: september 2018
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