Run the Numbers

Analyzing a property is the most important step in owning real estate. Without a solid return on investment, then there really is no reason to purchase the investment. But how do you know if a deal is worth buying or not? You run the numbers.

It is crucial that any person who wants to become a real estate investor must first become an expert on their local market. To do this, an investor must locate and analyze lots of properties. You’ll often hear people say “There are no deals available!” and to those people, I would ask “Have you analyzed any properties recently?” In order to really know if there are no deals available you have to be in the trenches analyzing as many deals as necessary to find one that fits your criteria.

Online Option

There are many excellent online resources to analyze real estate properties. My personal favorite is from BiggerPockets. I believe that this online resource provides users with an easy to use interface and produces a great result. The one major downfall to it is that you can only use it five times for free. This limits you greatly in that it is likely you will need to analyze more than five properties before purchasing a deal. For this reason, I created my own property analysis tool on Google Sheets.

Google Sheets/Excel

Creating your own Excel or Google Sheet analysis really isn’t too difficult. With some basic understanding of excel, you can easily create a spreadsheet that shows you whether or not a property is worth purchasing. If you don’t have any knowledge of excel don’t worry! There are tons of simple videos on Youtube that teach you the basics. From there you will need to also learn what the equations are for analyzing a deal. I would highly suggest Brandon Turner’s Book The Book on Rental Property Investing as it provides readers with an easy to understand guide to analyzing deals. I built my calculator mostly off of parts of this book along with the help of some experienced real estate investors.

It does take some time to build the initial excel sheet but once you have got everything figured out it will work flawlessly. Not only should you feel proud about creating your own deal analysis tool but you now have a better understanding of what the numbers actually mean. You can use this tool as many times as you need and can even make adjustments to it as time goes on. Following the completion of your calculator, I would highly recommend you get it checked out by another real estate investor. Who knows, maybe after this conversation you can analyze deals for them and make some money!

Ultimately, the option you end up choosing really doesn’t matter that much. What matters is that you take action. I challenge you to analyze one property a day. By doing this action you will build a solid routine and will become extremely knowledgeable about your market. Eventually, this task will be second nature and you will analyze a deal in only a couple of minutes. You will understand what is not a deal and move on to find the next. Run the numbers, become an expert, and you will be on your way to a better future.

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https://www.biggerpockets.com/