08/06/2025
Listen!!!!
The truth is, some of us, sometimes, time and again, hear the word " let's invest in commercial properties,, if there is an opportunity let's buy and lease.
Wait a minute!! take your time, do analysis and see if the property is wealth investing.
To invest in commercial properties is little bit tricky but profitable.
How do we know that this property is going to fill in my pockets, make profits and so on?
The first step is to be focused on** NET OPERATING INCOME (NOI).
This is the income generated by a property after deducting operating expenses.
What?🤔
You got this!! thus rental property generated deducting property taxes, maintance costs, insurance and vacancy rate. The result help us to know if the the property is able to generate cash flow from its operations.
Let's do maths here:
Let's say a rental property generates
- Rental income: $15000 per month(total income)
Monthly expenses include:
- Property taxes $1000
- Maintenance $1700
- Insurance. $ 300
- Vacancy rate(to be explained later)= $100
There fore total expenses =$3100
So here Net Operating Income(NOI) = Total income - Total expenses
$15000 - $3100= $11900
Annual NOI would be $11900×12 (months) =$142, 800
This $142,800 represents the propertys income after covering operating income.
The question could be: How do we know that this NOI is an I deal for investing?
Below are some indicators
1. Stable occupancy: Low vacancy rate or the property is fully or almost occupied
2. Potential for appreciation: The property value is likely to increase ie if the property is located in prime locations.
3. High rental yield: Rental income is substantial high compared to property value.
4. Low Expense ratio: Operating expenses are very low compared to gross income.
Next topic will be looking at Capitalization rate which tell us how much the property is earning.
WattsAp contact:
+265990726566
Thank you.