There are 2 that you need to know, expense ratio and Debt Service Coverage or DSC. The expense ratio is your expense to income ratio. This is crucial in determining whether you should acquire a potential property. You need to know what other, similar properties expense ratio is that are competing with the subject property. In other words, if the subject property is supposedly operating at 43% expenses to income but every competing property is operating at 52%, you need to ask why is there such a huge disparity? Are there a number of expenses not getting included that should be? Has the property been underassessed and the real estate taxes are substantially lower than the competition? Better plan on a huge increase after you acquire it! Or is the listing broker manipulating the expenses to show a better NOI than is realistic?
DSC will be discussed in the next post.
