Takeaways of doing deal analysis

[Marshall Shen]

Hi all,

I have done some deal analyses and received useful feedback from you all! First of all, I want to say THANK YOU for all the mentorship, I have felt a lot more confident about real estate investing.

As the next step, I will want to understand my options for financing and get pre-qualified for loans.

Before that, I want to share some lessons with the community.

Deal analysis is the first step and a crucial step towards rental RE investing. Given the numbers add up, there are additional steps such as home inspection, and offer negotiation. But, let’s build our real estate investment practice one step at the time, and use this uncertain time to improve rather than sit-and-wait.

• Before diving into detailed analysis, use 1% rule to quickly evaluate deals
• If a property passes 1% rule, then look deeper
• When focused on cash flow, focus on annual cash-on-cash return
• Have a thorough estimate on investment cash
• • Please include closing cost, the % varies by region
  • Adjustment % of downpayment
• Monthly expense = monthly operating expense + monthly mortgage expense
• For mortgage expense, use established mortgage calculator (e.g. PMT in Google sheet)
• Have a conservative estimate on monthly operating expense
• • Assume 8% vacancy rate, which equates to 1 month per year
  • For elder buildings, use 10% as CAPEX rate, 4% newly built.
• Use rentometer to have a proper estimate of the monthly income.