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Rainer
154,471
Ken Jones, Commercial Real Estate
Kenneth J. Jones, Inc. - Toms River, NJ

Eddy Gongora First, profit and loss isn't a "formula," it's a basic math accounting function of simple addition and subtraction.

Second, are your trying to EVALUATE an investment? Or, are you trying to form an opinion of its value (which would be called VALUATION)?

When EVALUATING an income producing property, you're trying to determine how good an investment in one property would be vs. another.

When making a VALUATION of an income producing property, you're trying to determine its value, whether to the general market or to a specific buyer/investor.

So, before you go any further in your efforts, please determine exactly what you want to know, then ask.

You may contact me privately if you'd like to discuss this issue futher.

Jul 19, 2020 08:55 AM
Rainmaker
1,229,112
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

Through the CAP Rate Analysis for buy & hold.

Jul 19, 2020 01:19 AM
Rainer
317,435
Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

proft and or loss year to date is not much value, it's the honor system... Prior year IRS filed return is useful in determining rents you might recover (not during covid though) and all the expenses from a to z. No owner will have the same expenses as repairs vary year to year and so do the occasional bad tenant who wrecks things. CAP rate will help a buyer determine if they can make money. Compare market rents to principle interest taxes and insurance with a 25 percent haircut is another method

Jul 19, 2020 04:00 PM
Ambassador
5,407,022
Bob Crane
Woodland Management Service / Woodland Real Estate, EXP - Stevens Point, WI
Forestland Experts! 715-204-9671

Not much for residential, however for our commercial and timberland investments it is important.

Jul 19, 2020 11:33 AM
Rainmaker
2,641,352
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Return on investment or ROI is a main player dynamic in income property and general investment. Where does one park money according to risk and return or whether it requires low, medium or high maintenace as well as if it is accessible (liquid) or have cash flow. Lets not forget write-offs as well. In the end you keep score two ways: Profit & loss + or - risk and end result

Jul 19, 2020 06:17 AM
Rainmaker
5,583,729
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Eddy,

It is rarely used in residential, it is used in commercial real estate and when someone is making an investment.  And the rest of the members have given you an answer.  A

Jul 20, 2020 08:06 AM
Rainer
116,438
Karen Climer
Demetree School of Real Estate - Orlando, FL
Teaching people to pass the real estate exam

Here's a video https://www.youtube.com/watch?v=701mhCJJYOM&list=UUCq4iOnYvMwoxfHvySgoEkg&index=6&t=0s

I think this is the formula you are asking about.  Good luck.

Jul 20, 2020 08:03 AM
Rainmaker
2,023,850
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

It allows us to see the Net Income which will service the Mortgage and help Appraisers arrive at a Value .

Jul 20, 2020 04:42 AM
Rainmaker
990,935
Doug Dawes
KW Evolution - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

 What Ken Jones  said

Jul 19, 2020 06:52 PM
Ambassador
3,054,835
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

You have some good comments here. 

I wish you all the best with your real estate studies. 

Jul 19, 2020 05:22 PM
Rainmaker
4,207,101
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Kenneth J. Jones, Broker of Record has you headed in the right direction.

Jul 20, 2020 05:42 AM