The NOI is Net Operating Income. You have income, expenses, and then you have NOI. 5 units and above are dependent on NOI. It’s what the price is based off of, what the banks look at, and what the cap rate is made from. To determine the NOI you take Gross income minus expenses = NOI. The higher the NOI the more cash flow it’s going to produce. 3 questions to ask in multi-family:

1.How much will you pay for the property?
2.How much will it operate for?
3.How much can you sell it for when you exit?

You can make money with any of these three ways, but ideally all three. Keep in mind that as soon as something comes on the market and it becomes a good deal with a good NOI, you often have over 10 or more buyers coming in immediately. Loopnet is the garbage dump for properties that aren’t selling. As an example, there is a deal for 14 units in Athens, Georgia. It costs 750K so you’d put 190K down and finance 460K. It’s 70% occupied. The NOI is 45K and the debt would be 32K annually. That means you’d basically be putting 190K at risk to make $1300 a month. That deal probably isn’t worth it! The bottom line is you have to know what you are doing with any investment.

8 comments
AlisdairMann
AlisdairMann

Wrong math!


750,000


minus


190000


560,000


GC - This deal would have cost you so much more

SuzannaP
SuzannaP

Grant, I am in LA area and sitting on 1M cash. Looking to buy a multifamily. is it a good area to invest? Thanks! Sue.


Ebong Eka
Ebong Eka

This is the best real estate show online/television...anywhere!

Tim Brooks
Tim Brooks

what is a good rule of thumb to estimate expenses?

ZMM95
ZMM95

What is the best way to raise money for real estate deals with high returns?

Jon Be
Jon Be

I have a company with two friends that's almost a year old. With AirBnB, Uber, and hustle we can show $5k+/month income. What are my odds of getting a deal if the NOI and the numbers add up?