EXAMPLE OF NOI (Net Operating Income)

Sales Price: $290,000

Income:
Gross Rent: $700/unit * 6 units * 12 months = $50,400
Vacancy: 10% vacancy = ($5,040)
Other Income: Laundry = $1500
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Total Gross Income: $46,860

Expenses:
Gas = $880
Electricity = $1300
Management = $5,040
Taxes = $2,160
Insurance = $1750
Water = $4,400
Maintenance = $4,000
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Total Expenses: $19,530(Expense/ Gross income = 41.7% of Gross Income goes to costs

I know I'm in the ballpark on expenses if it's between 40-50% of Gross Income.

Net Operating Income: $27330
Cap Rate (NOI/Sales Price): 9.4%

NOTE: remember that the CAP is on a fully leveraged amount of $290,000 the return would be higher if the investor put down 15% Example $43,500 (.15*290,000) down and financed amount of $246,500(290,000-43,500) equals a CAP of 11.08%