What the Real Estate gurus don't teach you- how to analyze a deal

Question

Hello BP family

My name is Pedro and i am fairly new to real estate, like many of you , i too was told that wholesaling is the high way to easy money /financial freedom. I knew it was too good to be true and i was right,from listening to the BP podcast and reading the UBG book it's a lot harder then what the gurus say it will be. From my understanding wholesaling is actually one of the hardest ways to start in real state but it can be done. One of the main components to a real estate deal is how to analyze a deal and how to know a good deal from a bad deal ( make your money on the buy). My question to the BP family is how do i learn how to analyze a deal? Can some one refer me to a blog,book or podcast that shows a step by step way to analyze a deal?

Thanks

Pedro Recarey · Answer

Trust me @Ryan Dossey its a lot harder then it look to find a seasoned investor even with my set of skills ( I am a project manager for a design company and have a degree in architecture) but i am going to my first REIA soon so i can start networking and get the ball rolling.

Bill Pate · Answer

Analyzing a property is really easy.  Calculate all monthly expenses including debt service(mortgage), property taxes, utilities, insurance, and maintenance/vacancy.  I learned how to do this myself with my first property.  My first property became a rental out of necessity rather than as an investment.  We were trying to sell the house at the bottom of the market and I rented it out rather than take a big loss.  Now a few years later I have seven rental units and six of them I own free and clear.  I live in Cleveland, so take that into account.  I have not paid over $35k for any of my recent rentals and all of them cash flow at least 12% ROI.  Some as high as 30% ROI.  That ROI also doesn't even take into account appreciation.  I don't factor that into the equation because I don't ever want to sell them.

Thad McNair · Answer

@Pedro Recarey There is no "Magic Formula" or "Secret" to analyzing deals. It has to do with many factors - your risk tolerance, your attention to detail, etc. In my experience, BP is essential source of information. Almost all the information for the basics is available here on the Bigger Pockets forums. Like everything in life, some things on BP you will agree with and some you will not. Over a period of years, I have developed tools that help me be comfortable with my decision as to weather to invest (these change weekly). There is no replacement for experience. You can jump start / leverage by researching and asking questions on BP. Remember that real estate is a Long Game. Continual investment of time in education and networking is NECESSARY! Good luck!

Pedro Recarey · Answer

@Ryan Dossey that the goal, hopefully if thing go well in the REIA meet up i don't have to put up a " looking for a mentor " post. I really hope it doesn't get to that but you gotta do what you gotta do.

Pedro Recarey · Answer

@Steven Leigh So i watch both videos (BP Wholesaling Calculator and Sean Comp calculator) and both have things that i dislike and like for example.

BP Wholesaling Calculator

Pros

• Easy to use and understand( video was pretty clear and to the point)
• Can be used for rentals also
• Info can be sent to a potential buyer

Cons

• Wasn't free( which isn't a big deal)
• Doesn't have the rehab cost in the mix by the foot ( can live with that )
• Doesn't have the spread sheet

Sean Comp calcalculator

Pros

• Free
• By the foot calculator a nice help 
• Has a spread

Cons

• Video was hard to follow and understand 
• Excel sheet is kinda clear
•  Not something i can send to a potential buyer

So my conclusion is both are good in there own way and when checking a deal i would most likely use a little bit of both.

thanks for the tip, now i am a little closer to making my first deal!

Ryan Dossey · Answer

Trust me.... I did it. In a town I moved to where we literally knew no one. Hit up local members on here and offer to swap your skills.

Ryan Dossey · Answer

@Pedro Recarey find a seasoned investor in your area who will let you walk projects with them. They can tell you what kind of rates investors are paying to get stuff done.

For Example here in Indiana I can remodel a full bath for $2500 and have it look VERY nice. Retail contractor would charge 2.3.5x that for the same job.

Pedro Recarey · Answer

I understand what your saying @Bill Pate but what you just stated isn't what i am really having a problem with, most of that info i can find by doing a little bit of digging. My problem come to play when i need to  come up with a realistic rehab cost that good for me and my end buyer. BTW congrats on the 6 rentals

Pedro Recarey · Answer

thanks guys for the tips i will look in to both of these @Steven Leigh @Jay Martin

Steven Leigh · Answer

@Pedro Recarey I wouldn't necessarily recommend the BP Wholesaling Calculator as I find that thing to be a total mess.

I keep posting this comps video in so many threads people are going to start thinking I'm a shill for Sean Terry, but he absolutely nails it with this system. Say what you will about how simple it is, and lots of investors have the opinion that wholesalers are supposed to be experts in repair costs, but I can tell you that almost every one of my deals closes for almost the exact numbers I estimate with this spreadsheet calculator.

Wholesalers waste WAY too much time on valuation and repair costs when they could just do ballpark figures and then get out there and do more deals!

https://www.youtube.com/watch?v=Cqgz5OpqvNU

What the Real Estate gurus don't teach you- how to analyze a deal

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