WOULD LIKE A SAMPLE OF A RATE OF RETURN FORMULA USED TO FIGURE IF A PROPERTY IS WORTH KEEPING OR SELLING..?

In Leasing Property - Asked by HILDY P. - Aug 26, 2010
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Dave R.
Owner/Investor
Coeur d'Alene, ID

Hildy, I have been buying manufactured home communities for 31 years now and from my perspective it all boils down to what return you are willing to accept. If you want/require at least a 10% return and your property cannot achieve it - sell it. However, if it is cranking 18-25%, I could refinance it to the amount where I would be achieving my 10% and reinvest the rest in another property. Or, just keep the 18-25% and be happy!
Dave

Aug 26, 2010
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David C.
Los Angeles, CA

Thank you for your question about whether or not an income property is worth keeping based on the rate of return. An income property is worth keeping if it is performing at or above the market rate of return because you are doing better than most. If you need to sell for financial reasons that is a different story.
The most commonly used ratio in the commercial real estate market is the CAP Rate, which compares the annual income of a property by the net operating expenses to get the CAP Rate.
Use the Analyzer on my page to generate ratios for all your prospective commercial real estate purchases.

Aug 31, 2010
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