Understand the numbers when analyzing deals.

[Bridget Campbell]

I am a newbie look for more resources on how to understand the numbers when analyzing deals.

[Tim Herman]

@Bridget Campbell it's good that you are wanting to understand the numbers. I use the term hard and soft costs or fixed and variable cost. Fixed costs are recurring costs every year. Taxes, insurance,principal and interest, utilities if paid by landlord. Soft costs or variable costs are costs that appear periodically. Vacancy usually expressed as a percentage. You never know when a tenant will leave or get evicted. 5% vacancy is the same as 5/100=1/20. Meaning you will have an average turnover every 20 months. I use 8% or 1 turnover every year for analysis purposes. In reality it should be 8.33%. Repairs is another item that is usually expressed as a %. What will it cost you for a service call to repair something. Mine average $200 per call. I like to save at least $50 per month or 5%. You need to build up the reserves when you have to paint between tenants. Capex or the the most underestimated expense beginning investors make. Capex budget should include roof 25 year life span, floors 10 year life span, appliances and hot water heater 12 year life span, hvac 20 year life span. I also include bath and kitchen remodel at 20 year life span. I use 10% at a minimum. A fixed cost I forgot was property management. I assume you want to be looking for good deals rather than managing a property. You should include where you are from and get more targeted advice.