First Boots On the Ground With Clipboard, Then Fanny At Desk With Calculator

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Boots before numbers crunchin’ was how it was taught to me. The investment world is and has been consumed with ‘the numbers’. Yet real estate investors, at least in my experience, do much analysis, and produce more spreadsheets based upon garbage numbers than even they’ll ever know. Possibly the worst source for income property numbers is your local MLS. Forget the probability that most rents and expenses are even cursorily vetted. Forget that most small residential income properties are listed by honest agents who do the vast majority of their business in owner occupied homes.

How ’bout the fact that even if the rents and expenses come directly from the seller’s tax return, they’re still virtually guaranteed to be inaccurate, at least in part. In California for instance, the real estate taxes today will not be what they are after you close escrow. Then there’s maintenance and repairs, always cheap and abundant fodder for one-liners. In San Diego, a 35 year old fourplex is merely considered broken in. Yet the operating expenses shown in the listing says it cost the current owner just $563 for that line item. Spotted the developing trend here?

Captain Obvious alert: It’s called income property for a reason. It’s value is BASED on it’s income. 

Grab your clipboard, put on a smile, and put your boots on the ground. Knock on doors to find out what’s really up in the neighborhoods with rent. Gain serious local intel from tenants and managers willing to talk with ya. Learn which buildings are rented below market, even in area tenants’ eyes. They often know the local neighborhood better than anyone, sometimes better than the owner. Over the years I’ve learned things about areas I ‘knew cold’ that stopped me in my tracks. Every now and then I’ve been able to spot a trend in its infancy. There are times when that knowledge can be invaluable.

Operating expenses — You’re already there, so why not?

Way back in the day, I was conducting an extensive clipboard excursion for a new client. She wanted to exchange her high equity duplex for more property in another, better neighborhood.  When asked the value of her property, she gave an honest answer. In fact, my immediate response was complete agreement. The next day I commenced by boots on the ground tour, clipboard in hand. Surprise surprise surprise. Long story short, her duplex was separately metered for both gas and electricity. Furthermore, each unit had it’s own water heater. With only a couple exceptions, the other duplexes in the area sported just one gas and one electric meter, and one water heater. In other words, even though she was commanding the same rents as her immediate competition, her expenses were demonstrably lower.

Obviously, this resulted in her NOI, (Net Operating Income) being higher. You see where this is goin’, right? Turns out real estate investors value net income a bit more than gross income. Who knew? 🙂 The difference in value, based on actual sales price, was around 10% of her competition.

Clipboard first — then calculator.

I realize that such a simple thing seems silly. Yet experience has shown me that first timers and short timers can easily miss this sorta thing. I know, cuz I’ve seen me do it. When I was around 26 or so, my mentor looked at my cash flow sheet one day and started laughin’ out loud. He then handed it back to me, asking between bouts of coughing, “What’d ya miss Mr. Analyst?” He’d given me homework a few days before. I was to ‘walk the neighborhood’ in which his own 22 unit building was located. I missed this very factor: An all electric building with one meter. This was no minor error, as it was clearly compounded by the number of units vs the aforementioned duplex.

He brought the lesson home though, by being serious as a heart attack. He asked me how I’d feel, if I’d sold it to a buyer as if it’d been separately metered? He made it so real, my heart sunk. It was as if I’d really done it. I never wanted to feel that way again.

From that day forward — clipboard — THEN calculator.

It’s as simple as A-B-C — until ya don’t do it.

First, get the chronology right. Then, at least at first (I still do), wield the clipboard yourself. Put your own boots on the ground. Get scary good at it. This post merely touches the tip of the iceberg of both the value this principle offers, and the potentially ruinous mistakes that can come from ignoring it. Like many tried and true practices, this one will not be mocked. Do the work, or pay the price.

Photo: Dan Dickenson

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. Great post Jeff. It’s amazing how often other investors come up with “imaginary numbers”; as if you couldn’t figure out the real numbers for yourself. And you are right, you can’t go by the MLS. I use that as a part of figuring out the “real numbers”. For instance, it will tell you what other investors are paying for houses in the area that are just like the one you are getting ready to put under contract. When I am figuring repairs I always figure high. I know they will cost more in th end.

  2. Jeff Brown

    Exactly, Sharon. I tell clients that although the NOI is built upon my own boots on the ground work and research, they still shouldn’t rely on it. When looking at the NOI with possible uses of cash flow in mind, skip the ‘sophisticated’ analysis. Take the GSI, divide by 2, and move on. If it’s worse than that, Murphy musta had a grudge.

  3. Good, common sense post. Also find out who owns the appliances, the tenants or the building owner. Installing ovens and fridges in 20 units could be a nasty surprise. Also the status of security deposits on hold with the current owner. If you are allowed to speak with current renters, ask about rent, utilities, who pays laundry and security deposits. In many areas, the owner must have a separate bank account, but small time landlords don’t always have to comply. I have found that the local paper or Craig’s list gives me a good feel for rents. I don’t want to be the absolute highest in the area, because only the absolute dregs will want to rent from you. I always ask to see the paid utility bills for the past year. The owner should keep them for tax records and you can check actual payments for gas, electric, water, garbage, etc. Around here, property taxes are the largest operating expense. Check the owner’s tax figures against the PINs. Be careful of two or more separate PINS that get forgotten by the owner when providing expense information.

    Good Luck. there are a lot of great deals now if you do your homework!

    • Jeff Brown

      Hey Gary — Good stuff. Most of the info you list would be found in what I call the ‘doc dump’ from seller’s own files, and verified in writing, signed by owner, saying all info is true.

      Most of the time much of that info is tough to come by before the offer is made. This is especially true with 1-4 units, for various practical reasons. The inspection/approval period would include everything you so wisely listed, and much more.

      Again, good stuff.

  4. Wow – that electric meter part got to the heart of the matter, Jeff. It’s the same even if it’s an owner-occupant buyer – if you don’t know the inventory, how are you going to represent them at the fiduciary level demanded by your agreement?

    Navy Chief, Navy Pride

  5. Great wake up call for everyone to “return to basics” and start walking on our legs again, instead of merely tapping on the keyboard.

    This is knowledge that anyone who is into Real Estate Investment should be able to learn and do almost automatically. In a world where newbies rely too often on Googling and posting search results, you may be surprised how seasoned and serious buyers/investors do these exact research on their own and sooner or later, the lazy ones (agents/brokers) ends up being embarrassed by these clients surprisingly knowing more about the innner workings of a certain property, its numbers and real investment potential value more than their agents who merely rigs out numbers hoping to make that “quick sale”.

    I will highly appreciate Jeff if you could give us your in-sights or write something about “bulk REOs”, its rewards and potential pitfalls…etc. Your direct and dauntless opinion will be priceless.

    I stumbled upon this video, seems promising, but maybe your personal assessment on the subject will prove to be a worthy endorsement or altogether an honest warning for real estate investors who seems to be hearing too much buzz about it right now.

    Here’s the youtube video title: (type it on youtube’s search box or click my name)
    Real Estate Investors build your real estate portfolio at wholesale prices today.

    Looking forward to reading your opinion bout this subject suggestion.

    • Erickson – I’m sure Jeff will chime in, but anyone hawking the secrets to riches through “bulk REO” is likely wasting your time. Over the years, we’ve had countless people on our site who were pitching bulk REO deals and 100% of them had nothing to show. Many who promote riches through this niche are simply preying on those folks who don’t know any better. While I can’t speak for this particular video you’re talking about, I can say that you should probably spend your energy on the tried and true methods for making money with real estate instead of worrying about some gimmicks that a guru is selling.

      Jeff — Your thoughts?

  6. Jeff,
    Love the post. Practical and invaluable advice. Thanks for the reminder to do what I already know (and sometimes forget!)

    When my boots are on the ground, I also love talking to neighbors. Man, the stories they tell. Just this week while talking to a neighbor across the street from a rental I own, I learned about trends in the neighborhood, number of foreclosures, rent comps (higher than I was currently charging), and the divorced next door neighbors who abandoned the house last week. I put a note on the vacant house, got a call today, and will be calling them back tomorrow. All that from a 10 minute conversation.

    Jeff, I’m also enjoying your articles on purposeful planning. I’m just starting to dig in. Thanks for sharing.

    • Jeff Brown

      Hey Chad — Much appreciated. I’ve had much the same experience at times with ‘productive’ conversations with the neighbors. Actually bought a car once that way. 🙂

      The Purposeful Planning posts are continuing this week.

  7. Robert Steele on

    It makes a lot more sense to me to do it the other way around. Perhaps things are different in multi-family or perhaps you have a lot of time to burn. But I run the numbers from my desk first and if the deal looks good then I spend the time to put my boots on the ground.

  8. Robert and Jeff, you are both right. With gas at $4.50 a gallon and time at a premium, it does not make much sense to drive around looking at properties that will never work.
    You can run a preliminary cut on the numbers from your office ( sell price, rental value, property taxes, insurance, ARV, etc.) before getting in your car. Just from pictures on the MLS, you can tell if your roof is shot, if you need new windows, and much more. If something will never work, I don’t bother looking at it. After a lot of experience in a half dozen towns, I can also tell by the address if the neighborhood is something I want or something I want to avoid.
    I think the gist of Jeff’s comments is to really do your homework before committing to the property or putting money at risk. Don’t take what the owner or listing agent says at face value.
    If you are a new investor, you can learn a bunch going out and looking at a lot of properties . If you have a lot of rehabs and rentals to manage, you want to be real careful with your time.

  9. Tend to agree with Robert there, to be honest – with the amounts of deals presented to one at any given market, “boots on the ground” to anything in the right price ranges would mean the really good deals will be snatched way before I’m done evaluating them, as I’ll be “on the ground” for most of my day.

    I also usually prefer the “make the numbers work first then confirm on the ground” approach. Maybe it is different strokes. Maybe homes and units are different too…we deal mainly in units.

    Any thoughts?

  10. Jeff Brown

    Hey Ziv — It’s not that I blindly head out after hearing of a property. I look at what I’ve called the pretend numbers, then head out with clipboard in hand if I’m interested. But I don’t do in depth analysis before doing the research. I’ve learned that a lotta my time gets wasted doing worthless analysis based upon garbage in and garbage out. I rely on my research and nobody else’s.

    It’s a quirk I have. 🙂

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