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The following performance ratio can be used by investors to assist in properly analyzing potential investnt opportunities. Wise investors who elect to master these principles will no doubt gain greater insight into property values and their worth relative to alternative opportunities.1. GROSS RENT MULTIPLIER (G.R.M.)The gross rent multiplier asures the relationip beeen the total purchase price of a property and its gross scheduled ine. It is the ratio of price to ine. The G.R.M. calculation is made as follows:Gross rent multiplier = purchase price gross scheduled ine = G.R.M.The Gross Rent Multiplier is similar to the cap rate in that it captures the relationip beeen revenues and price; however Cheap NFL Jerseys , there are o primary differences. The first is that while the G.R.M. asures the relationip beeen gross revenues and price, the cap rate asures the relationip beeen revenues, or N.O.I., and price. The second difference is that one ratio is inverted pared to the other. For example, purchase price is the nurator in the G.R.M. quotient, but it’s the denominator in the cap rate. While a higher cap rate is preferred to a lower cap rate, a lower G.R.M. is preferred to a higher G.R.M. This is true because the ratio will decrease the lower the purchase price is relative to ine. It will also decrease the higher the ine is relative to the purchase price.For examples, the G.R.M. of 5.09 asures the relationip beeen the total purchase price and the gross scheduled ine in Year 1. (If the purchase price is $1,002,00 and gross scheduled ine is $196,800)Gross Rent Multiplier = $1,002,000 $196,800 = 5.09In the model used to make the calculation Cheap Jerseys From China , both improvents and closing costs have been ftored into the analysis. Although there are no improvents in this example, they are typically included if major capital expenditures are expected. If the improvents are expected to increase the gross revenues, that, too, ould be taken into consideration. The G.R.M. can be calculated on either an as-is basis with no changes or improvents to the property, or on a pro-forma basis, which includes both improvents and the expected increase in revenues that would result from the improvents.2. OPERATING RATIOThe next performance asurent used to analyze ine producing properties is the operating ratio (OR), which is the ratio beeen total operating expenses and gross ine. Like the operating efficiency ratio, it provides a gauge of how efficiently a given property is being operated. Whereas the O.E.R. asures efficiency relative to a property’s total square footage, the OR asures efficiency relative to a property’s ine. The calculation is made as follows:Operating ratio = total operating expenses gross ine = ORDepending on the type of ine property, an OR can range from about 30 percent to as high as 70 percent or even more. Comrcial properties tend to have a lower OR since most of the expenses are passed through to the tenant. Multifamily properties, on the other hand, tend to have a sowhat higher OR since the expenses that are passed through. For example, an apartnt building being operated as an “all bills paid” property will certainly have higher expenses relative to its ine pared to a similar property in which the utilities are paid by the tenants.For examples illustrated the OR of 58.5 percent asures the relationip beeen total operating expenses and gross ine and is calculated as follows:OR = $120 Cheap Jerseys ,000 $204,960 = 58.5%The result in this example of 58.5 percent is sowhat on the high side, but does not fall outside the range of normal ratios. An investor looking to create value in an ine-producing property would carefully examine eh ftor that contributes to the operating expenses. In other words, a high OR may signal that repairs and maintenance are abnormally high, or perhaps that managent expenses could be trimd. Conversely, an unusually low OR could signal that not all of the operating expenses are being reported. If repairs and maintenance, for example, are known to average 10 to 15 percent of gross ine but are being reported as only 3 or 4 percent, then either the property is in exceptionally good condition or not everything is being reported.3. BREAK-EVEN RATIOThe final investnt performance asure we examine is known as the break-even ratio (B.E.R.), which asures the relationip beeen total ca inflows and total ca outflows. The B.E.R. is similar to the OR in that both ratios use total operating expenses as part or all of the nurator and gross ine as the denominator. The difference beeen the o is that the B.E.R. includes as part of the nurator the debt service. The B.E.R serves as a performance asurent of ca flows from a property, and the OR serves as a performance asurent of ine and expenses.As the break-even ratio’s na implies, the break-even point is the point at which the total ca inflows are extly equal to the total ca outflows. A property with a negative ca flow has a ratio greater than 1.0, which ans that its ca outflows exceed its ca inflows; conversely, a property with a positive ca flow has a ratio less than 1.0 Wholesale Jerseys China , which ans that its ca inflows exceed its ca outflows. The break-even ratio is calculated as follows:Break-even ratio = (total operating expenses + debt service) gross ine = BERFor examples, the B.E.R would be calculated by adding the total operating expenses of $120,000 to the debt service of $61,276 and then dividing this sum by the property’s gross ine of $204,960. Take a mont to review the calculation.BER = ($120,000 + $61,276) $204,960 = 88.4%The property in this example has a positive ca flow since the B.E.R. is 88.4 percent, which is less than 1.0, or 100 percent. I strongly rend to investors who have adopted a buy-and-hold strategy to invest in only those properties that have a positive ca flow and a B.E.R. of less than 1.0. To do otherwise ans that additional ca must be invested eh month. A property with a negative ca flow is just like my three growing sons. Exp