In my blog post, How to Analyze Rental Property Investments, I promised a demo of my favorite real estate analysis app, Deal Check. So, here it is!
In my demo, I assume that you already read the other blog posts in the Getting Started in Real Estate Series. If the 1% rule or cash-on-cash return don’t ring a bell, I highly recommend reading my other posts first.
There are many spreadsheets and calculators out there so it makes it hard to decide which one is best. Prior to using deal check, I tried several spreadsheets, as well as the BiggerPockets calculator. The reason DealCheck wins is because I can do it in my phone on the-go. I also love the reports output which is great when financing a new deal.
In the video below, I am analyzing a live deal we are under contract to buy. We call it the BlueJays. This property is a Fourplex with two buildings. Each building has two units with 2Bed/1Bath averaging 600 SQFT. The rents are way under market with a potential increase of $740-$940. One of the buildings has been renovated, while the other has been completely neglected. We estimate that a $30k investment is needed to bring the second building up to standards, but after renovated, the property will bring about $900 in cash flow per month.
Please keep in mind that I analyze deals based on my investing criteria, risk tolerance and overall long-term plan. We are not in this game for short-term gains. We are willing and able to take a negative hit at first for the sake of long-term returns. Some investors would disagree with our purchase criteria and that’s okay.
ANALYSIS DETAILS
Inputs:
- Conventional Financing of 75% of purchase price with 5.625% interest rate.
- Financing of the 25% down payment for a year at 10% interest rate
- As-in rents: $475+$450+$235+$300= $1,460. (Way below market)
- Operating Expenses and Reserves:
- 10% Vacancy
- 10% Maintenance and Repairs
- 5% Capital Expenditures
- 10% Management Fee
- Property Taxes with estimated increase due to sale
- Insurance per quote received from our insurance broker, Real Protect
- Landscaping estimated at $100 per month based on other agreements
Our Purchase Criteria:
- At least $300 cash-flow
- Monthly operating expenses should not be more than 50% of the rental income
- Cash-on-cash return must be 10%
- Potential rent must yield $150 per unit.
The video below is broken into different segments: Intro, Property Analysis, Setting Purchase Criteria and Market Analysis.
There you have it. This is how we analyze most of our deal these days. I say most because after you get the hang of it analyzing deals becomes a lot easier and you can quickly bet out properties in your head.
If you are looking to get started in real estate, analyzing deals on a regular basis is the best way to learn your market and get comfortable with running the numbers for a deal.
Deal Check has a forever free version so you can give a try just for fun.
If you decide to go for the premium version and would like to support me, you can use my code and link for a 30% discount. Affiliate link – DealCheck/Beyondjustnumbers, enter my promo code: BESTDEAL for the discount.
In the next post, I’ll explain the BRRRR method. BUY, REHAB, RENT, REFINANCE & REPEAT.
Thank you for reading and let me know in the comments if you have any questions or would like me to write about something specific.
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