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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.

Current Annual Net Income


• 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

Livermore Fremont San Leandro

Price $3,685,000 $3,065,000 $2,490,000

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


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

Gross income $285,780 N/A $220,970

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%