This is your "north star." It is the total income minus all operating expenses (taxes, insurance, maintenance, utilities). It does not include your mortgage payment. Cap Rate (Capitalization Rate): Calculated as

Buying an apartment complex is a significant transition from residential to commercial real estate. It requires moving from "emotional" valuation (comparable home sales) to "performance-based" valuation (Net Operating Income and Cap Rates). 1. Master the Financial Metrics

Check if units are individually metered. If the landlord pays for water or heat for the whole building, your expenses are at the mercy of the tenants' usage habits. 3. Choose Your Asset Class Apartment buildings are generally graded into four tiers: