Running The Numbers, HELP!

[Louis Schmidt]

Hello, I am looking to buy my first property. I use the BP Calculators to estimate potential CF. One of the biggest issues i am finding in my analysis is that i just cant find the return I am hoping for. I love the calculators and was hoping someone would have some insight on what they do and what they look for. I notice that on a lot of deals it is the CAPEX reserves and vacancy that hurt my numbers. I know how important both of those numbers are, but I have spoken with some investors who say "yes we account for vacancy and CAPEX but when analyzing deals we do not account for that in our CF, we will make sure to have reserves though". SO I am curious, what are people on BP doing? How are you guys running the numbers and what numbers are you looking for? Thank you.

[Joseph Cacciapaglia]

I see a lot of would-be investors struggle with this very issue. They're trying to make their first deal match the returns that experienced professional investors are getting. You have to realize that the people that are on podcasts talking about their deals are not representative of real estate investors in general. If they were, they wouldn't have made it on the show to begin with. You can't compare the first deal that you're putting together to what you're hearing from these investors.

I believe you should only compare the returns from one deal to the other investment options you have available. If you look at the total returns (not just cash flow), you're probably much better off investing in something today than waiting for that perfect deal that may never materialize. Most of the successful investors that I know did relatively mediocre deals in the beginning. Over time they learned how to add more value or find better deals. The biggest return on your first few deals will be knowledge and experience.