|Posted by: Sam Sep 5 2004, 02:32 AM
| In the City of Los Angeles, because of rent control, Buyers cannot seem to get any loan on the 5 units. How much income does the building have to produce for a $600,000 purchase price?????
|Posted by: loanuniverse Sep 5 2004, 11:34 AM
| Bank lenders usually look for a 125% debt service coverage from Net Operating Income, which is calculated by:
Taking rental income
Adjusting it down by expected vacancies
Deducting Operating Expenses.
You can find a link to a spreadsheet that will help you calculate that here:
While your question is one of debt service coverage, the rent controls also affect the value of the building and you might want to apply a capitalization rate to the Net Operating Income, and see if maybe the $600,000 price is within market.