If you’ve spent any amount of time researching real estate investing, you have seen the concept of a property deal analyzer, and if you have compared any of them side by side, you may be a little confused, because they all look a little different. And here’s the truth, every commercial broker and investor uses a property deal analyzer. And every single of of them has a claim to fame and thinks theirs is the best. However, there are a few things to consider when it comes to creating your own property deal analyzer.
The Bottom Line
The important thing to remember with any analysis is that the all the side by side comparisons must be done, calculated and projected to get the best return on the investors money. Investors don’t buy the property, they buy for the return on cash-flow. The appreciation, the depreciation and the amortization on a property is the most important thing every time. Our numbers must give the optimal return to investors or it is vital that you walk away from the deal.
The First Steps
To begin, you will want to start creating spreadsheets that will help you evaluate the numbers. These are some of the categories that you need to consider.
1. Property Values & Pricing
The Value (as is, and after repairs)
Estimated Repair Costs
Purchase Price
Estimated Hold Time
2. Financing Costs
Borrowing Costs
Repair Costs
3. Holding Costs
Property Tax Rate
HOA Fees
Insurance Cost
Utility Costs
Miscellaneous Holding Costs
4. Buying Transaction Costs
Escrow & Attorney Fees
Title Insurance & Title Search Fees
Miscellaneous Buying Costs
5. Selling Transaction Costs
Escrow & Attorney Fees
Selling Recording Fees
Realtor Fees
Transfer & Conveyance Fees
Home Warranty
Staging Costs
Marketing Costs
Miscellaneous Selling Costs
Pro Forma Perspective
Lastly, you need to look at the property as though you actually own it. You need to evaluate how this property will perform financially once you enact your good management and new operations policies. For this analysis you’ll need to create or get a spreadsheet that includes categories for all projected income, expenses, debt service and capital expenditures over a 12-month period. There are hundreds, if not thousands of these spreadsheets that you can obtain online.
Are you new to investing and looking for a way to get involved with multifamily investing? Are you interested in investing in add value properties? Magnolia Design Properties is a real estate investment company that is honed in on add value multi family properties in the B and C class and we would love to have you join us in investing! Let us do the heavy lifting of property acquisition, and head over to our contact page and fill out the form so that we can contact you with information about investment opportunities that you can join us in!
