Expert: Troy Labani - 11/11/2009

Question
Troy,
I live in the Boston area and am interested in buying multi-family homes. Aside from calculating a mortgage payment/income from tenants, are there any other calculations I should be looking at to compare two potential properties?
Thanks!
Jena

Answer
Jena,

I am typically much faster at responding to questions. I have been very busy lately, and so have taken longer than I would like to respond to your question. I apologize.

There are many other considerations.

Operating expenses come in many forms. Cost of marketing, utilities, insurance, taxes, turnover, routine and preventive maintenance are just a few of the very many.

Income can also be derived from other than just tenant rent. Laundry, vending, and services are just a few of the most common.

When comparing two properties for their potential as investments, beyond just looking at their current and potential income and expense possibilities, one must also look at many other factors. The existing and potential conditions of the immediate market, the physical plant condition and the factors related to their differences of potential problems or benefits of their unique construction types, the tenant profile and their potential positives and negatives, and an almost infinite number of small details which ultimately govern the success or failure of the property.

Beyond these, is also the issue of management. The overall success of all income properties is the direct result of the quality and capabilities of who is managing it.

While your question was related directly to "calculations" it seemed valuable to expand my answer to the issues that drive the numbers. Also, I hope to to have made evident that there is much more to the comparison than just the financials.

I hope that I have been helpful. Please feel free to ask more if I have inspired a new thought or brought up something that interests you.

Sincerely,

Troy