For new investors, jumping in can seem like a surreal experience. It feels a lot like my daughter Everly does in this picture. She sits on a chair precariously overlooking Liberty Pole Way where she appreciates the severity of both downward perspectives. Clearly she has no footing and relies on me to position herself among a world of potential pitfalls. My best investor clients sit similarly within our markets knowing that though not visible, I have arranged their snapshot with the utmost of care to maximize their view of the current market while keeping them safe through experience and reliability.
Our Pro Forma always starts here:
Gross Rents -35%
- 10% PM
- 10% Capital Reserve Account (roof, HVAC, windows)
- 10% Vacancy Reserve
- 5% repair reserve (wear and tear, paint, locks, electrical fixtures etc)
= NOI net operating income
– actual costs of ownership (vary by property)
- taxes (city & county)
- for more than 3 units , garbage
- land care, snow removal
= cash flow
cash flow / (acquisition + any rent ready rehab)
cash on cash ROI.