Still Investing? Here's How To Calculate Real Estate Rates of Returns
By Winston Heverly, GRI, ABR, SFR, CDPE, CIAS, PA
(Coldwell Banker Access Realty)
How To Calculate Real Estate Rates of ReturnsCalculation Reference Sheet Gross Operating Income (GOI) This is a calculation of the total potential monthly rental income (also known as gross rents or gross potential income). Remember if a vacancy reserve is not included in the expenses, it should be subtracted from the total potential rental income.Net Operating Income (NOI)This is a calculation of gross operating income (GOI) minus expenses NOI = (GOI)-Operating Expenses Cap Rate (Capitalization Rate) (NOI) divided by (Purchase Price) = Cap Rate This a calculation of the yearly net operating Income (NOI) divided by the value, or the purchase price. Debt Service Ratio (DSR)This is a calculation of the NOI, divided by the debt s...
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