Need help finding the numbers

[Tarron B.]

Started on my analyzing journey today. Went over to realtor.com and found a property that only had the amount for taxes and estimated mortgage listed. No rent roll or any other income or expenses. What are my options at this point? Even though I'm hearing that these deals that make it on sites like these are "scraps". I still have to practice analyzing. 

[Ben Wilkins]

@Tarron B. - for initial analysis, I use RentJungle or RentOMeter to check local rent rates. This is easier and quicker than going to a broker or agent.

For expenses, you can check the local township website for water, sewer, and trash rates. Once you learn an area, you can get a feel for what a good estimate is. For example, for my area I usually estimate $3000 annual for water for a duplex. Is this the exact number? No, but it's pretty close based on history and experience.

Never believe that all of the deals on these websites are scraps.... just a lot of them are. Even still, I still do exactly what you're doing: practice analyzing these deals.

A wise blogger (I don't remember who haha) once typed: (Almost) every property has a price at which it is worth investing. The entire purpose of analyzing is to calculate what it is worth for you to invest.

Sure, there are a few tax delinquent properties and other odd circumstances that can make a property never worth investing, but for the most part I have found the above statement to be true.

Think about it this way: a property cash flow is affected by rent rates (income), utility expenses, percentage expenses, and financing payments. Any of these numbers can be played with in order to make a property look good on paper.

So how can you affect each one?

Income: You can raise rent or add coin-op, parking, etc.

Utility Expenses: You can have the tenants pay or you can improve the property. The first is maybe possible, the second will cost money and is dependent on the property.

Percentage expenses: This is where most people mess up. They say "oh, I can decrease my maintenance, or my CapEx, or my vacancies, or my property management - any of these will increase my cash flow!" Wrong. While it is actually a correct statement, you're setting yourself up for failure if you have a long vacancy, or if your furnace gets flooded and the roof blows off in a storm. Set aside savings for CapEx and vacancies, or all of your previous two years' profits will pay for the repairs. As a side note - even if you're managing, isn't your time worth something? What if you decide to stop managing? Always set aside PM, even if you're paying yourself.

Financing payments: This is the easiest true value that you can adjust (along with income). The purchase price, the terms that you get, and the amount of down payment all affect this value. As such, it is the easiest to manipulate in order to increase cash flow. Because of that, it is the one that I generally target first when analyzing a property: find what purchase price makes an investment worth it for you. Like I said: (almost) every property has a price that will make a good investment.

While that's more information than you technically asked for, I hope that it helps. I want to encourage you to keep analyzing properties that are listed on websites, and try to find a price that will make them good investments. The numbers might not always make sense to the seller, but one may get you a property (and it's good practice). Keep up the good work!