Stuck on analyzing deals

[Joshua Gutierrez]

Hi ya'll! My name is Josh. I recently retired medically from law enforcement out here in California. I just got my real estate license and have been heavily reading about building cash flow through multifamily properties. I'm working with 200k of my own money and would like to capitalize on that. I was thinking of a system something like flip, flip, flip, acquire a multifamily rental, flip, flip flip, acquire etc. I have a couple of great mentors I grew up with that are doing great our here with flips and rentals and I'm actually on one of their teams for the retail side. However, I'm finding it difficult to gather their time and learn how to analyze deals. I'm getting potentials deals sent to me from other agents and MLS alerts I have set up for my specific criteria, but I get stuck on analyzing a deal. For example, I am looking into a triplex here in California. The asking price is 579K (I know I don't want it for that). GSI is $39,600, NOI is $27,100 ($12,500 annual expenses according to the listing). I tried using the 50% rule, but I must be doing something wrong because according to me I would have $,1650 left to pay my mortgage, which is not going to happen. I feel like once I get the analyzing down I will be ready to move forward and start making offers on properties, however, I have been stuck on analyzing for a few months now and it has become quite frustrating. I also suffer from PTSD being a Marine Combat Vet, which I feel contributes to me getting frustrated rather quickly. I'd like to get a system for analyzing put in place to get the ball rolling. I have watched several of Brandon's videos on analyzing deals and several others and even listened to several podcasts on the topic, but for some reason things haven't clicked for me yet. Any help, advice, etc. is greatly appreciated. I prefer the Marine Corps "KISS" method (Keep It Simple Stupid). Thank you all.

[Justin Wai]

@Joshua Gutierrez Do you have Microsoft Excel?  If so, on this website, under tools>fileplace>spreadsheets there are a lot of spreadsheets one can utilize.  Aside from that I like to look at the Cash on Cash return in a rough calculation.  I take the price of the property and multiply by 23% (20% down 3% closing costs) and add any repair costs I expect to that, getting my expected cash outlay.  Then I calculate the mortgage payment (there are tons of calculators online to do this), add in monthly taxes (county website, then update for your purchase price), monthly insurance (get an estimate from an insurance broker), and add $50 per a unit in maintenance (this will vary depending on size of unit, age, etc.); multiply this monthly cost by 12.  Next I run comps to see how much rent per a month I think I can get.  I multiply the rent by 11 (I assume one month of vacancy).  I subtract the yearly rent by  yearly cost and get my yearly cash flow ("CF") (some minor things are left out like taxes, but I consider that to be upside to my analysis).  Lastly, I divide my CF by my cash outlay that we did in the beginning (the 23%).  Personally I want a minimum of 7% cash on cash return, but if I find a deal with more risk my return minimum requirement goes up and vice versa.  I have had 20% cash on cash returns that need some work, and I have had 5.5% cash on cash return with a model home lease back that I expect to give me the 5.5% for 2 years and 0 work / minimum risk.

For example, I buy a $100k place.  My cash outlay is $23k.  Mortgage payment is ~$480, taxes are $200, Insurance is $100 and maintenance is $50.  My cash payments are $830.  If I can rent it for $1100 then my yearly gross rent is $12,100 (1100x11).  My yearly cash expense is $9960 (830*12).  My CF is $2140.  Lastly take CF and divide Cash outlay; $2140/$23k which gives me a cash on cash return of 9.3%.  If the property looks to be in decent condition in a good area I would like this deal.  There is other qualitative information that is very important too, but above was just looking at the analysis.