When looking to purchase income property what does number x gross mean?

Question

For an apartment what would 28.46 x gross be?

Priced to sell at number x gross?

Answer 1

It's just another way of figuring out what a property's worth.

Gross is the total amount of income the property generates. You take the total amount of rent the apartment generates and multiply it by 28.46 and that's your sales price.

Answer 2

That calculation is worthless. If it is residential real estate, comparable sales are really the only way of estimating value.

I have heard statistics like that, but you can't rely on them.

Remember, with investment property, you make your money when you buy it not when you sell it so be sure of the value. Cash flow is also important as most lenders will want the property to be self-sufficient at 75% of the gross rents. That is your PITI cannot exceed 75% of the gross monthly rents.

If it is commercial property, you need to know what the net operating income is. Then you use a capitalization rate (what rate do you require on an investment of such a risk?). Lets say a property generates 10K in NOI. You require 10% return on your investment. You might be willing to pay 10,000/0.10 or 100,000 for the property.

Get financials on the property for 3 years before you write an offer. If the seller will not provide them, they are lying to you about the income and expenses.

Good luck.  

Answer 3

Gross rental income divided into the purchase price.  Just gives you an idea of whether you are paying a high or low price for the property.