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Net Operating Income for an Apartment Complex |
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Written by Anthony Chara
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Wednesday, 11 April 2007 |
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There are 3 figures that go hand-in-hand when trying to determine a commercial/apartment property's value. They are Net Operating Income (NOI), Cap Rate and Asking Price. If you know 2 of the figures you can always figure out the third. This month, we'll be talking about the NOI of a property. More specifically, how NOI is calculated as it relates to an apartment building. I'm going to start with a simplified version of how to arrive at the NOI of a property and then expand each category. Basically, the formula is: Income - Expenses (other than debt service) = Net Operating Income. |
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Last Updated ( Wednesday, 18 April 2007 )
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Written by Anthony Chara
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Wednesday, 10 October 2007 |
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Operating Ratio is a calculation that will tell you how efficiently or inefficiently an Apartment Complex is being operated. Calculating the Operating Ratio is simple as long as you have all the correct figures to use. The two figures you need to calculate the ‘OR’ are the OE or Operating Expenses (TIMMUR), except your debt service/mortgage payments, and the EGI or Effective Gross Income. You may recall both of these terms from my previous articles. I won’t repeat them here. If you don’t remember them, just go to www.AnthonyChara.com and look through the past articles for a refresher. In order to find the OR, you take the Operating Expenses (OE) and divide it by the Effective Gross Income (EGI). Example: OE / EGI = $57,542 / $136,291 = 42.2%. As a rule of thumb, the OR should be between 40%-50%. This will vary depending on several factors such as the age of the building, how recently it was rehabbed and the area of the country where the building is located. |
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Last Updated ( Wednesday, 10 October 2007 )
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What is Forced Appreciation? |
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Written by Anthony Chara
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Thursday, 08 November 2007 |
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Forced Appreciation is a potential way to increase the value of your Apartment Complex by Tens of Thousands of dollars within a few short months. Unlike Single Family Homes that appreciate based on supply and demand, Apartments appreciate based on the income that the property generates. If you refer to some of my previous articles on my web site you’ll find information on Cap Rate and Net Operating Income. Using these two vital figures you can figure out the value on any apartment complex. I’m not going to reiterate that information here since it’s already spelled out on my web site, however, I will quickly recap the Apartment Value formula so you’ll be able to follow along with how making some minor changes to your property’s revenue or expenses can dramatically increase the value. If you remember from these previous articles, the Value of an Apartment Complex is calculated by dividing the Net Operating Income by the Cap Rate. (NOI / CR = Value) |
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Last Updated ( Thursday, 08 November 2007 )
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