Analyzing the numbers

[Kevin Facteau]

Hello BiggerPockets community,

I am new to investing and currently looking for my first property. I am seeking multifamily properties and have already stumbled upon a couple of them. Unfortunately, I wasn’t fast enough and someone beat me to it. 

I am interested to know, what tool or tools or even steps do many of you experienced investors rely on when analyzing the numbers to determine if the listing is worth contacting an agent for a showing? 

I hope this question makes sense. 

Thank you! 

[Brook Davenport]

This will greatly depend on your end goal for investing Kevin. Whether you are investing for Cash flow, appreciation, looking for value add, or just tax benefits.

I first build out my buy box, which the more narrow it is, the better (multi family, 3 units, in XYZ zip code, at this price point per sqft, build after XYZ year......). 

Once I have that, I can narrow my search. Personally I look to find something that will exceed my returns in the stock market (10% cash on cash). Using a simple mortgage calculator online, I can find my approx. monthly payment for a potential property. I keep a running excel sheet going of market rents in my area as well. This can be found by dividing current rents by the sqft of the property (my market is $1.25 sqft). 

I take this info, will browse the mls and quickly can do some back of napkin math to see if the potential property will pencil out using this approx rent and approx mortgage and service payments. If it does, then I will dig deeper. Building out an analysis sheet to underwrite potential properties if they get past this first part helped me lots, pm me and I can send it your way.