Analyze a Deal With Me
- Paul Stamm
- Jul 17, 2022
- 2 min read
The first thing I do when analyzing a property is to see what the purchase price is in comparison to the number of bedrooms and bathrooms. I can easily rule out a property if it is too expensive for the number of bedrooms and bathrooms it has or if it does not meet my buying criteria altogether.
Here is the listing:
The purchase price is a little high for the area but it does have a good amount of bedrooms and bathrooms. I will enter this information into my Google Sheet calculator.
Next, I will enter in the rent for the property. This can be found by looking on Zillow at other comparable properties in the area.
As you can see there is another property with the same number of bedrooms and bathrooms listed for $1595 but there is also a 3 bedroom 2 bathroom listed for $1625. I feel that since this property in its current condition is fixed up and is appealing to renters that it could get more than $1595. With the right listing photos and caption, I believe I can rent it for $1700. Here are some pictures:
As you can see it is in pretty great shape so I will only put $1000 for some repairs.
Looking at the Google Sheet, you can see the Mortgage Calculator and the Loan Math. The Mortgage Calculator does the calculations to find out the mortgage payment and the Loan Math will be used to find the total cost out of pocket. Moving on further in the Google Sheet I can find that the total cost of the project that I will need to pay is $40,100.
Next, I’ll move on to the expenses. You’ll add the mortgage payment, the property tax which is typically 10% of the purchase price divided by 12 for each month, insurance, vacancy and repairs each being 5% of the rent, capital expenditures (shown in picture below), and finally property management which is 11% of the monthly rent. The calculator will add all of these together and subtract them from the monthly rent.
Now we get into the important part of the calculations. I can see that this property will cash flow $168.48 each month. The CoCROI 5.04% and the Cap Rate is 7.63%. So what do I think of this property? I’m glad to see that it cash flows. It is a small amount but the way I look at this is what bill would that $168.48 eliminate in my life. How many more properties like this would it take to get rid of all of my bills? This is how I look at that $168.48! It’s potential.
This property is not by any means a home run, but, it is a base hit. It is something that I could purchase and begin to learn about real estate. It is something that I could own for a couple of years and then sell it to buy something better. This property has some potential and that is why it should be evaluated. Real estate is a tool. Use it to better your life!
Attached is a pdf copy of the spreadsheet. Check it out.
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