Analyzing deals properly

[Jose Valdez]

Hello! I'm new to RE and really excited to get started. I've tried to educate myself by reading, podcasts, webinars etc. Now, I would like to start networking to learn a lot more. Currently live in Compton, CA. I've been trying to analyze deals just to get an idea of how the numbers work. Not sure if I'm overthinking but I'm having a hard time trying to input the data as accurately as possible to obtain a good idea of the return I would get. What would you guys recommend in terms of trying to accurately use rent, management fees, maintenance etc for example to properly analyze deals. I've been using information from redfin to estimate rent for example but other websites have completely different numbers. What would you guys recommend? Thank you all!

[Account Closed]

Never start with less than 4 units if you can afford them because when you own a 4-unit property the value of the property increases almost exponentially when you increase the rents because the 'rule-of-thumb' value for a 4-unit property is based on the Gross Multiplier.

Example. I live in Gardena California and as you know Gardena is less than 1 mole from Compton. So, in Compton, the Gross Multiplier for a 4-unit property in this hot market is no less than 15.

So, suppose you purchase a 4-unit property in Compton and each unit rents for $1800 per month.

Your annual income will be $1800 x 4 units x 12 months = $86,400 Annual Gross Income.

If the Gross Multiplier for that building is 15, then the purchase price for that building is $1,296,000

The following graph shows how much profit you can earn by increasing the rents $50 when you close escrow and only $40 per month every year. You cannot earn this type profit with single family homes, or a duplex.

As for learning to do the math by yourself. Get a book called 50 Real Estate Investing Calculations on Amazon. The book does not do the math as in the chart below, but you should learn at least the concept and BP has a great calculator that does the math close to the chart below.

It looks like you asked the correct questions, but never ever trust advice from an agent or broker because nobody represents you and every broker will tell you that every property they have for sale is the perfect property for you as long as you are dumb enough to buy what they are selling.

Look at thousands of properties and do the math and after a short time you will have more knowledge about the math and investing than most brokers and this no joke because I go to real estate club meeting and experienced brokers don't have a clue about what a good investment is if it bit them in the butt. Don't forget that everyone on this planet has their own personal agenda and could care less about whether or your agenda alighs.