Mar 22 (edited) • Workshops and Events
Alabama New Members “Welcome” - March 21, 2026
First off, shoutout to Paul Thompson. As always, he delivered a great presentation at the “Commercial Cash Flow Blue Print“!
For everyone I met today in Alabama, here is a simple breakdown of what Paul went over today. A quick “back-of-the-napkin” underwriting method with each step labeled.
SECTION 1: CORE FORMULA (NOI)
NOI = Units × Monthly Rent × (1 − Vacancy) × (1 − Expense Ratio) × 12 months
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SECTION 2: HOW THE PERCENTAGES WORK
Vacancy = 5%
1 − 0.05 = 0.95
Meaning: You keep 95% of the income after vacancy
Expense Ratio = 45%
1 − 0.45 = 0.55
Meaning: You keep 55% of the income after expenses
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SECTION 3: EXAMPLE 1 (8 UNITS)
Given:
8 Units
$1,200 Monthly Rent
$1,000,000 Purchase Price
$60,000 Annual Debt
$200,000 Cash Invested
Step 1: Gross Monthly Income
8 units × $1,200 rent = $9,600 monthly income
Step 2: Gross Annual Income
$9,600 monthly × 12 months = $115,200 annual income
Step 3: After Vacancy
$115,200 × 0.95 (1 − 0.05 vacancy) = $109,440
Step 4: NOI
$109,440 × 0.55 (1 − 0.45 expenses) = $60,192 NOI
Step 5: Cash Flow
$60,192 NOI − $60,000 debt = $192 annual cash flow
Step 6: Cap Rate
$60,192 NOI ÷ $1,000,000 price = 6.0% cap rate
Step 7: Cash on Cash
$192 cash flow ÷ $200,000 cash = 0.1% return
Conclusion:
Break-even deal. This does not meet our criteria. As deal finders/wholesalers, we are typically targeting at least an 8% cap.
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SECTION 4: EXAMPLE 2 (12 UNITS)
Given:
12 Units
$1,100 Monthly Rent
$1,200,000 Purchase Price
$70,000 Annual Debt
$240,000 Cash Invested
Step 1: Gross Monthly Income
12 units × $1,100 rent = $13,200 monthly income
Step 2: Gross Annual Income
$13,200 × 12 months = $158,400 annual income
Step 3: After Vacancy
$158,400 × 0.95 (1 − 0.05 vacancy) = $150,480
Step 4: NOI
$150,480 × 0.55 (1 − 0.45 expenses) = $82,764 NOI
Step 5: Cash Flow
$82,764 NOI − $70,000 debt = $12,764 annual cash flow
Step 6: Cap Rate
$82,764 NOI ÷ $1,200,000 price = 6.9% cap rate
Step 7: Cash on Cash
$12,764 cash flow ÷ $240,000 cash = 5.3% return
Conclusion:
Closer, but still below our target. We are typically looking for 8% cap or better.
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SECTION 5: EXAMPLE 3 (20 UNITS)
Given:
20 Units
$1,250 Monthly Rent
$2,000,000 Purchase Price
$110,000 Annual Debt
$400,000 Cash Invested
Step 1: Gross Monthly Income
20 units × $1,250 rent = $25,000 monthly income
Step 2: Gross Annual Income
$25,000 × 12 months = $300,000 annual income
Step 3: After Vacancy
$300,000 × 0.95 (1 − 0.05 vacancy) = $285,000
Step 4: NOI
$285,000 × 0.55 (1 − 0.45 expenses) = $156,750 NOI
Step 5: Cash Flow
$156,750 NOI − $110,000 debt = $46,750 annual cash flow
Step 6: Cap Rate
$156,750 NOI ÷ $2,000,000 price = 7.8% cap rate
Step 7: Cash on Cash
$46,750 cash flow ÷ $400,000 cash = 11.7% return
Conclusion:
This is getting close to our target. As deal finders/wholesalers, we are aiming for 8% cap or higher.
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SECTION 6: FINAL
This is not full underwriting.
This is just a quick way to decide:
Does this deal meet our baseline criteria (8% cap or better)?
If yes → go deeper.
If not → move on or renegotiate.
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Alabama New Members “Welcome” - March 21, 2026
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