How to Analyze a Property for Profit 117 50 percent of income. These numbers assume that tenants are paying the utilities. Simply do a quick scan of the expenses: Are they at least 50 percent of the income? = 48% Expense Ratio $370,000 in Expenses$772,000 in Income This one’s a little low at 48 percent. If you want to be a conservative investor, then assume expenses will be a little higher, as in 50 percent. You’ll often see the expense figure come in much lower than the rule of thumb. When this happens, do not just assume it’s a great deal and go with the lower numbers. Instead, increase the figure to 50 percent and then do your calculations. Why? Because when the figures come in lower than the rule of thumb, it means one of three things—all of them bad: 1. The seller is not doing regular repairs. 2. The seller doesn’t know the true expenses. 3. The seller is lying. It’s usually explanation number one, that the seller has been deferring the repair and maintenance.
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owner: Redemption - (no access) - [David_Lindahl]_Multi-Family_Millions_How_Anyone_(b-ok.org).pdf, p136