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# Apartment Income in Livermore

## • Gross Income ＝ Pre-tax net sales minus

cost of sales
• Operating Expense = An expense arising
in the normal course of running a business
• Net Operating Income= Income after
deducting for operating expenses but
before deducting for income taxes and
interest.
Cap Rate
• The cap rate is the assumed rate of return
on an investment in real estate.

• Cap Rate =
Property Price

## • From an income standpoint, the higher the

cap rate, the better deal.
Which is the better deal?
• Example:
b) Six unit apartment project sold for \$300,000. The net
income is \$24,000.
c) Six unit apartment project sold for \$280,000. The net
income is \$22,000.

## • Calculate Cap Rate:

• \$24,000 / \$300,000 = .08 or 8%
• \$22,000 / \$280,000 = .786 or 7.86%

• Conclusion:
Example a) has bigger cap rate. Therefore, a) is the better
deal.
Apartment Income

## Total property 60,027 sq 44,630.4 sq 32,517.6 sq

size
Ave unit price \$167,500 \$153,250 \$155,625

## Operating \$69,748 N/A \$83,014

expense
Net Operating \$216,032 \$133.118 \$131,754
Income
Cap Rate 5.53% 4.34% 5.29%