**What Grant Means by “Deal Factor”**
When Grant says **deal factor**, he is usually talking about the **annual debt factor** or **mortgage constant**.
That is just a shortcut number banks use to answer this question:
**“For every $1 of loan, how much do I have to pay each year?”**
That’s it.
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# **Step 1 — Start with the property income**
Let’s use the same example:
* 4 units
* $2,100 rent each
* 12 months
Math:
4 × 2,100 = **8,400 per month**
8,400 × 12 = **100,800 per year**
So the building brings in:
**Gross income = $100,800**
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# **Step 2 — Subtract expenses**
Let’s say expenses are about **20%**
100,800 × 20% = **20,160**
Now subtract:
100,800 − 20,160 = **80,640**
That is your **NOI**
**NOI = $80,640**
This is the money left before debt.
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# **Step 3 — Bank wants a safety cushion**
The bank does not want all $80,640 going to the loan payment.
They want margin.
So they use **DSCR**
Example:
**DSCR = 1.25**
That means the property needs to make **1.25 times** the debt payment.
So to find the max annual debt payment:
80,640 ÷ 1.25 = **64,512**
So the bank says:
**“This property can support about $64,512 per year in debt payments.”**
---
# **Step 4 — This is where the deal factor comes in**
Now they ask:
**“If the property can pay $64,512 per year, how big of a loan does that support?”**
They use the **deal factor**.
Example deal factor:
**7%** or **0.07**
That means:
For every **$1 borrowed**, annual debt payment is about **7 cents**
Or:
For every **$100,000 borrowed**, annual debt payment is about **$7,000**
---
# **Step 5 — Calculate the loan**
Take the max annual debt payment:
64,512
Divide by the deal factor:
64,512 ÷ 0.07 = **921,600**
So the bank says:
**“Based on this income, I can lend about $921,600.”**
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# **The whole flow in one line**
Gross income
→ minus expenses
→ NOI
→ divide by DSCR
→ max annual debt payment
→ divide by deal factor
→ loan amount
---
# **Super simple version**
If the property can safely pay:
**$70,000 per year**
And the deal factor is:
**7%**
Then:
70,000 ÷ 0.07 = **$1,000,000 loan**
That is the shortcut.
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# **Why the deal factor matters**
The **higher** the factor, the **smaller** the loan.
The **lower** the factor, the **bigger** the loan.
### Example:
If annual debt allowed is **$64,000**
At **7% factor**:
64,000 ÷ 0.07 = **914,286**
At **8% factor**:
64,000 ÷ 0.08 = **800,000**
At **6% factor**:
64,000 ÷ 0.06 = **1,066,667**
So:
* **Lower factor = more leverage**
* **Higher factor = less leverage**
---
# **What changes the deal factor?**
Usually:
* interest rate
* amortization term
* loan structure
### Simple idea:
* Higher rate = higher factor
* Shorter payoff = higher factor
* Lower rate = lower factor
* Longer payoff = lower factor
---
# **Easy cheat sheet**
If Grant says:
* **6 deal factor** = about 6% annual debt load
* **7 deal factor** = about 7% annual debt load
* **8 deal factor** = about 8% annual debt load
So if he says:
**“Take the NOI and divide by the deal factor”**
He means:
**Loan amount = Annual debt the property can support ÷ factor**
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# **One full example step by step**
## Property
4 units at $2,100 each
## Income
4 × 2,100 = 8,400 per month
8,400 × 12 = 100,800 per year
## Expenses
100,800 × 20% = 20,160
## NOI
100,800 − 20,160 = 80,640
## DSCR
80,640 ÷ 1.25 = 64,512
## Deal factor
Assume 7%
## Loan
64,512 ÷ 0.07 = 921,600
So the property supports about:
**$921,600 loan**
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# **How you use this without using banks**
You still use it to ask:
* How much debt can this asset carry?
* Am I below that number?
* Is my structure safer than bank structure?
That helps you know if the deal is strong.
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# **How I would explain it out loud**
“The deal factor is just a shortcut for annual loan cost. Once I know the property’s NOI and the DSCR target, I can find the max yearly payment. Then I divide that by the deal factor to estimate the loan size.”
---
# **Your quick phone formula**
## Formula:
**Loan = NOI ÷ DSCR ÷ Deal Factor**
Example:
80,640 ÷ 1.25 ÷ 0.07 = **921,600**