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!"# %&' (#)* +,-)-# (.*# /0 !".

12
By uiio Katsimbiakis
Novembei 1, 2u1S

When it comes to ieal estate
investments, multifamily
piopeities aie hanus uown
the most effective way to
inciease youi net woith. But
not all piopeities aie goou
ueals. Beie's a simple 4-step
math tool you can use to
iuentify a gieat multifamily
investment. It's calleu the
Su% Rule.

1. Stait by ueteimining youi !"#$$ &#'()*+ ,'-#./. This is the total sum of all
ients, launuiy, anu othei money coming in.
2. Next, use the 012 34*/ to ueteimine youi monthly expenses. The 012
34*/ states that ovei time, on aveiage about half of youi !"#$$ &#'()*+
,'-#./ will go towaius non-moitgage expenses such as iepaiis, taxes,
insuiance, ongoing maintenance, vacancy chaiges, etc.
S. Then ueteimine youi &#'()*+ &#"(565/ 7.#4'(.
4. Subtiact youi &#'()*+ &#"(565/ 7.#4'( fiom youi total in step two. The
uiffeience is the extia cash flow that you get to keep pei month.

Let's uo an example:

1. 12S Nain Stieet is a thiee-family piopeity cuiiently listeu at $12S,uuu. The
units go foi $4uu, $Suu, anu $62S a month, plus theie's $2S pei month pei
unit foi stoiage. So, !"#$$ &#'()*+ ,'-#./ = $1,6uu.
2. 0sing the 012 34*/, we can ieasonably pieuict that half of that is gonna go
towaius expenses, leaving us with $8uu pei month to pay the moitgage.
S. 0sing an online moitgage calculatoi, we can ueteimine that if we bought the
piopeity foi $12S,uuu anu put uown a 2u% uown payment, oui moitgage
woulu be $1uu,uuu, anu at S% inteiest ovei Su yeais, oui &#'()*+
&#"(565/ 7.#4'( = $SS6.
4. If we have $8uu pei month aftei expenses, anu $SS6 of it is going towaius
moitgage, that leaves us with $264 pei month in cash flow.

Now, if we can be making $264 pei month in cash flow, that's $S,168 pei yeai. Anu
on a $2S,uuu uown payment, that woiks out to a 12.67% cash on cash ietuin on
investment. You can compaie these two numbeis-the monthly cash flow anu the
ietuin on investment-with othei investment oppoitunities anu see if the ueal is
woith it to you. I like to tell people to not settle foi any less than 8911 :/" .#'()
:/" 4';( in cash flow.

Lastly, iemembei that this is a iule of thumb to be useu foi making quick uecisions.
It uoesn't take into account futuie iise in value, the loan pay uown, oi tax benefits.
0nce you ueciue you'ie inteiesteu, always sit uown with a spieausheet anu calculate
line by line the actual expenses of the piopeity baseu on the histoiy.

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