Real Estate Income Quick Formula

Quick Worksheet for Real Estate Income Property

Purchase Price - Market Value = (Income Potential)

Income Potential – After Repair Value (ARV)= (Potential Income)

Potential Income/Mortgage– Avg Rental for area= Income Potential

          Above is a quick formula for analyzing Real Estate Income Property. #1 Rule is to look for a Deal. The reason why is because of the old saying "Buy low Sell high."  Key point to keep in mind is that nothing is set in stone and Real Estate Investing is a risk.

Purchase Price - Market Value? = (Income Potential)

          In order to "Buy low Sell high" the purchase price that you are going to buy the property should be less than the current Market Value. The percentage amount your looking for on average should be no less than 30% - 40%. 

                               

                                Income Potential – After Repair Value (ARV)*= (Potential Income)

          To make a profit you also need room or a cushion for other expenses such as ARV            (After Repair Value) which consist of the upgrades or fixes to make the property appealing to potential buyer. Whether its just cosmetics or full renovation such as knocking out a wall the cost has to be accounted for since it plays a big factor the income.   

                               Potential Income/Mortgage*– Avg Rental for area?= Income Potential

         If the property is going to be use as a Rental Property, its best to subtract the Mortgage by the Average Rentals in the area this will give you an idea of your Income Potential. Do your research, because a a rental that is not price correctly will become more of an expense than an income generator.