Critical Metrics That You Should Look for Before Investing in Apartment Deals
As a Quality Property Management Company, we’ve talked with many owners over the years who have invested in apartment deals.
Most investors like investing in apartments because the average investor operates by the Grant Cardone principle that “more doors equals more money’.
If you plan on investing in apartments in Orange County, or any other community across California, there are several critical metrics that you should look for in an apartment deal which include the following:
#1 – Cap Rate
The Capitalization Rate (Cap Rate), is the rate of return that you can expect to generate when you invest in an apartment deal. The Cap Rate for a deal is computed by dividing a properties net operating income by the current market value of the property
#2 – Debt Service Coverage Ratio
Another important critical metric that you should look for before investing in a rental property is the debt service coverage ratio.
This ratio is typically used by lenders to determine the risk level of an investment before they grant a loan to you.
#3 – Cash on Cash Return
Last of all, but most important, if the two critical metrics that we first mentioned in the article make sense, the next important indicator that you should look for in an investment property before you purchase it is a cash-on-cash return.
Cash flow is king when purchasing an investment property so you want to make sure specifically that you have positive cash flow left over every single month after paying your mortgage and other expenses related to the property because, without cash flow, the deal just doesn’t make sense.
Save Time and Money Managing Your Investment Properties
Are you tired of managing your investment properties yourself? If so, contact our Orange County Property Management today by calling us at (800) 294-4656, connect with us through our website, or via social media.