AN UPDATE ON MY JOURNEY AND LOOKING FOR ADVICE

[Ivan Correa]

I havent been on in a while, I've been working hard at lining up the right things and the right partners. I've yet to do my first deal but its for many reasons that are not part of fear. One main reason I traveled a lot because i had the time to do it and unique opportunities to get the local experience. SO, i currently work for a hard money lender here in NJ also i have gotten my Real estate license. I've lined up partners strategically both capital and labor partners willing to work with me, were solidifying everything on paper officially next week.

we will be doing a deal rather quickly which is very exciting i have been looking at properties non stop day and night and any chance i get. NOW, with my finance background i analyze the properties in a way that makes sense to me with that being said IM REALLY INTERESTED IN LEARNING HOW PEOPLE VIEW AND ANALYZE a "deal".

be as detailed as possible on your analysis and how you go about it, your steps and the reasoning behind it. as i see posts come in i will posts how i go about mine so that you guys can critique and also give me pointers.

PS: if you guys have deals in northern and central NJ please let me know were looking to close on the right deal ASAP

[John Leavelle]

@Ivan Correa

bownin?

The first thing I do is identify a market (zip code) and neighborhood to target. I want to know as much as possible about the area as I can. School ratings, Crime, Class of neighborhoods, average annual income, percentage of rentals, types of rental properties (SFR, Duplex, Triplex, 4plex, Apartments), rental rates for each type (1 BR, 2 BR, 3 BR ...) Utility services, and so on.

When I start sorting thru properties they must meet my initial criteria.   They must be distressed, list price to gross monthly rents ratio must meet the 1% rule or better, and they must be able to currently Cash Flow $100 per unit using the 50% rule.  I may make exceptions sometimes. 

Properties passing the initial screening I will analyze using the Four Square Method as Brandon decsribes here:

https://www.biggerpockets.com/renewsblog/easily-an...

I also determine the Fair Market Value (FMV)/After Repair Value (ARV) for the property with the help of my Realtor. Since I use the BRRRR strategy I get pre-qualified for the Refinance loan. I then calculate my All-in cost basis (Purchase price, Rehab costs, Holding and Closing costs) using the LTV ratio the lender provides.

If it still looks good after the analysis I will visit the property to get an idea of the condition (taking pictures).   I make a list of every possible thing I need to include in a Rehab and develop a ruff Rehab cost (I add an additional 20% just in case).  I will subtract the Rehab estimate, Holding and Closing estimates from the All-in cost basis to come up with a Maximum Purchase Price (MPP).  Using this information I work with my Realtor to put an offer together.

If the offer is totally rejected I file it away.  I might keep tabs on it to see if there is a asking price drop and/or following up on down the road.  If they come back with a counter offer then we start the negotiation process.  If the offer is accepted I schedule a professional inspection to verify the condition and life expectancy  of all major components and appliances.  I will usually walk the property with the inspector and my General Contractor so that he can confirm or adjust my Rehab estimates.  Any unseen issues will be presented to the Seller for remediation/negotiation if required.  I develop a Statement of Work (SOW) for the contractor and he submits a formal bid for the job.  Once we close the sledge hammer starts swinging.

When I am analyzing properties I want to be able to Force Appreciation enough to be able to complete the BRRRR process. I also look for properties that have rental rates under market rates. Both of these objectives help insure good cash flow and cash on cash returns.

Hope this is what you are looking for.