Your Complete Guide to Analyzing a Property in Just 10 Minutes

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When I first got started with looking for multifamily properties, it took me four hours to answer the question, “What is the most I can offer for this particular deal?” As you probably know, you’ve got to kiss a lot of frogs before you find a good deal and can put it under contract. The time it took to analyze deals was a real issue, and that impacted my ability to get deals done.

I’ve since learned that I was wasting my time. Maybe I can help you learn this lesson sooner than I did and give you some tips on how you can do this in 10 minutes or less.

When you first get a marketing package from one of your commercial real estate brokers, it can be overwhelming. Some of these packages are 20 pages or more! I found myself reading every page, and of course I wanted to be detail-oriented in my analysis. I was examining the financials with a fine-toothed comb, comparing the reported real estate taxes with what’s published online, doing rental comps for the area and comparing them to the reported rents, and performing other research.

Did I mention this was a waste of time?

Your goal at this stage is not to begin due diligence on this property, but to assess the fair market value of the building based on the information you were given.

Many times the marketing packages are not only incomplete, but they’re overly optimistic with the income and expenses. You can use this to your advantage to start the negotiating process. If we get a positive reaction, we can then delve into the deal a bit more. But only if there’s a nibble!

Here is a better way to do this.

The 10-Minute Analysis

Step #1: Adjust the Income—4 minutes

If the marketing package contains actual financials, look for the gross scheduled income and adjustments for vacancies, concessions, and bad debt, etc. If these adjustments are greater than 10%, then use that number; otherwise, use 10% as a vacancy factor.

If you have a rent roll as well, compare the bottom-line income in the rent roll with the financials in the marketing package, and use the lower of the two.

If you only have the ProForma financials, then use those numbers.

Related: How to Analyze the Real Estate Market to Avoid Major Investing Mistakes

Keep track of any adjustments you make to the income because you’re going to be communicating those to the broker later.

Step #2: Adjust the Expenses—3 minutes

This is going to be easy.

If the reported or ProForma expenses are greater than 55%, then use that number; otherwise, use 55%. Often, when the reported expenses are less than 55%, they’re missing something. For example, the expenses may be missing a management fee (because the current owner is managing the property himself), or perhaps it’s missing insurance or some other expense.

Don’t spend a lot of time on this, but see if you can find SOME expense that is missing from the broker’s marketing package. You’re going to use that as an argument that the expenses are unrealistically low.

Now, determine your adjusted net operating income (NOI) by subtracting your adjusted expenses from your adjusted income.

Step #3: Use the Advertised Cap Rate to Come Up With a Revised Fair Market Value—3 minutes

Usually the marketing package advertises a certain cap rate for the property, as in, “Awesome deal at a 8.6% cap!”

If the cap rate is not that obvious, you can quickly deduce it by taking the NOI from the package and dividing it by the asking price.

Make a note of that cap rate because you’re going to use it to your advantage shortly.

Now, determine your adjusted NOI from Steps 1 and 2 and divide it by the advertised cap rate. This will give you the adjusted price for the property.

Typically, this number will be lower than the asking price. That’s because the income and expenses in the marketing package were overly optimistic to begin with!

Make note of the adjusted price. Your offer price should be below that to give you some negotiating room.

Step #4: Get Back to the Broker With Your Analysis and Informal Offer Price

Compose an email to the broker in which you explain your adjustments to the income and expenses. Explain that after applying the broker’s cap rate, the adjusted price is X, and that you’d be happy to make an offer at the price if the seller would be amenable to that.

Something like this:

Hey Rob — I looked over the package you sent me. Everything looks good: it’s what we talked about on the phone. I made a few adjustments to the underwriting in the package, though.

For starters, I don’t have the actual financials, so I had to rely on the ProForma numbers, and we both know those are going to be better than actuals, right? Well, that’s all I have at the moment, except you also sent me the rent roll. The rent roll income is about $30,000 less than what you have in the ProForma, so that’s what I’m using for the underwriting.

WRT the expenses, I don’t have the actuals, but the ProForma expenses in the package only added up to about 35% of income. For example, it looks like the insurance expenses are missing, and there are hardly any repairs in the P&L. Based on experience and looking at actual financials from similar listings in the area, I know those are way low. I normally use 55% of income for the expenses, and that’s what I’m using here.

You’re advertising a 8.5% cap rate for this deal. I’m not 100% sure if that’s fair for this area, but let’s assume it is. If you apply an 8.5% cap rate to the adjusted Net Operating Income, the valuation of the building is $1.75M, quite a bit away from the $2.4M asking price.

If you see something awry with my underwriting, let me know. I could make an offer at asking price, but I don’t want to waste your time if we both know the actual NOI will be lower than what you have in the ProFormas once we get into due diligence. So I’d rather be a bit more realistic upfront.

I’m not sure how set your seller is on the asking price, but I’d be pleased to put in an offer at $1.75M if he would consider it.

Let me know what you think. I look forward to hearing from you.

Related: How I Analyze a Real Estate Deal, Step by Step

What Have You Done?

  1. You’ve spent no more than 10 minutes analyzing the deal to come up with an offer price. You used the information you were given, plus some rules of thumb. But you didn’t launch an investigation to get better numbers—at least not yet.
  2. You got back to the broker quickly with feedback. Brokers tell me that only 25% of their buyers get back to them with feedback. So if you do, you’ve elevated yourself to the top 25% of that broker’s list of buyers. A good place to be, no?
  3. You’ve started the negotiation process. Yes, you have. It starts informally, but it started. The broker may not respond, or he may say that the seller wants asking or that there are multiple offers at a higher price. Or you may get a counter. And now you’re in the game!

So, don’t waste your life away analyzing deals. Work smarter, not harder. If you do, you’ll be able to look at more deals and increase your chances of finding a deal that will actually work.

Will you use my analysis method? Any tips to add?

Leave me a comment below!

About Author

Michael Blank

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.


  1. I would suggest using your own representative in the transaction a professional negotiator and avoid working directly with the listing agent. It’s importent to know the listing agent represents the seller and if they are any good at there job they will do what they need to to the highest price posable for there client. Hiring a good negotiator is free as the seller has agreed that half of the listing agents commition will pay for it. A good negotiator will use some of the same tactics you suggested however they will present the offer directly to the desion maker and will use there skills to get you the lowest price posable.

    • Michael Blank

      Joe … I’ve not heard of this being done, but it’s an interesting idea. I do have two brokers who also want to act as buyer’s brokers. However, I’m finding that they’re not adding a lot of value (like underwriting the deal!).

    • Katie Rogers

      You are talking about buyer’s agents, and they are not good negotiators. And they are not free. They are paid for out of the proceeds of the sold house. Who provided the proceeds? You, the buyer, did. They do not use their skills to get the lowest price possible. More often they will come back to you and ask you for a higher offer. Many times they are unable to understand, and therefore even present and explain, the terms of any offer with the least bit of creativity in it. This has happened time and again to me. The last time, the seller ended up selling for $50,000 less than my highest and best offer. I am about to hire my eleventh buyer’s agent. I hope I have finally found one who can do the job..

  2. I find that often, the seller conveniently omits vacancy expense, management fees and severely underestimates maintenance expenses.

    I use 5% for vacancy, 10% of rent for maintenance, and 7% for management. 7% is light for a SFH, and about right for a multi-unit under 10 units.

  3. Michael,

    How would you value a property that has actual (according to the broker) income of $60K, expenses of $57K, and NOI of $3K/year?
    The cap rate in the offering package is 8.4% but the asking price is $600K based on proforma income of $110K or so. The property is half empty and there is a room for improvement, yet $600K seems to be a value of a fully occupied property.


    • Michael Blank

      Nick, this is a difficult question to answer. Theoretically, a property is valued based on its income. But in your example, what if there isn’t any income because it’s half empty? Or what if it’s totally empty? Does that mean it’s worth $0? Of course not. But valuing something like this is much more difficult. Your traditional metrics, like cash on cash return and cap rate are right out the window. You need to consider more the overall return. Also, how long will the cash flow be 0 or even negative? You need to work that into the deal as well. I do have a spreadsheet that models all of this, but I’m struggling coming up with general guidlines for “re-positioning” projects like these. Anyone with any rules of thumb?

    • Nick this is not hard and is done every day. If this is a property that you can get good cap rate comps for then you would use the income approach USING market numbers, market rents, vacancy, expenses, etc to reach a fully performing NOI. If you don’t know these numbers don’t invest until you do even if the property is fully leased up. Then you would divide that NOI by an appropriate cap rate comp from other sales. That will give you the current market value. From that number you’d DEDUCT all costs to lease up the property. This is called a below the line adjustment. There are formulas that are standard to accomplish this.
      Now if this is a SFR or smaller multi you will not have reliable cap rate comps. Use a GRM to get market value and use the same lease up calculations and deduct from the FMV.

      • Bob, I posted more details on that property in a deal analysis forum and you’ve participated in that thread. The consensus was 200-300K. I just wanted to get Michael’s opinion on it.

        • Nick, I didn’t realize this was a repeated situation. In that thread both @Roy N and I told you how to value the property. Using the cap rates and GRM’s you provided but only being able to guesstimate lease up costs we came closest to the actual selling price of over $500, 000. I was only trying to show Michael Blank and anyone that had not read that thread how they could value an underperforming property.

  4. What do you do when the actual numbers for the past 2-3 years still look good, do you still apply your formula and ignore the actuals?
    I also believe in using a Buyers Broker. A Listing Broker cannot serve two masters.
    What do you think?,

    • Katie Rogers

      Even though a buyer’s broker legally has a fiduciary duty toward the buyer, realistically they must maintain cordial, club-like relationships with seller’s brokers. Any buyer’s agent who gets a reputation of actually looking out for the buyer’s interests (as opposed to finding the price that maximizes the commission for both brokers) will soon find that none of the seller’s brokers will work with him. The real estate buying and selling process fails to properly align the buyer’s agents interest with the buyer. The system needs serious reform.

  5. Another good, actionable article, Michael.
    I’m going to use this suggestion as well as your other one about creating ‘sample’ deals that I’d like to invest in to help me understand the mechanics of deal analysis a little better.
    Right now the offers will just be for practice (probably written to myself ^^) but I know if I keep practicing, soon I’ll be ready to write them for real.

  6. 1. EXCELLENT POST! This 10 minute analysis is how it’s done, folks. I routinely look at 200-300 unit deals and I essentially use this exact same process. Great points about saving time and being efficient.

    2. No need to use a buyer’s broker. Our firm has purchased over 2,000 units in the past 12 months and always just dealt directly with the listing broker. As you move into bigger deals, buyer’s brokers are essentially non-existent. If you know what you are doing, what value do they add?

  7. Michael,

    I’d say not really. People tend to make it so complicated, but as you highlighted in your post, 10 minutes is about what you need to get a 90% comfort level with the pricing. Obviously, if you were to proceed down the road on this deal and either submit an LOI and/or get into due diligence, you’d get actual financials from the seller and then go to work confirming every assumption and line by line income and expense to ensure no surprises.

    Only thing I do differently is that I call the broker with my feedback (usually). Most good brokers are rarely sitting at their desks and so I tend to get a much quicker connection when I call.

  8. Michael,
    Has this approach actually worked for you? I’ve found that with most small multifamilies in my area most agents and sellers have no idea what a cap rate is or how to apply it. I’ve tried your approach with a small commercial strip mall, and my offer was not only rejected but “the sellers were offended”. Of course, lenders understand cap rate and income analysis and therefore this property has not sold. Would this be a better approach to take with more sophisticated sellers of larger properties?

    • Michael Blank

      Hi Amy … you bring up a good point. If you’re looking at 4 units and less, many times those are valued more by looking at comps, like non-commercial residential property. For example, if you were to look at a town-house style duplex, the agent may price each unit based on what other town houses are selling for. Income and cap rate are not taken into consideration. If you’re looking at slightly larger apt buildings, you may still be dealing with less sophisticated sellers and residential agent. In that case, educating them about how commercial real estate is priced coupled with their inability to sell (because they’re asking for too much!) would position you as a buyer who’s serious and knows what you’re doing. This is why having a numbers-based approach is useful. As the buildings get larger, the more sophisticated the sellers and brokers become, the more numbers-based and less emotional it becomes. In other words, another argument to buy bigger properties!

  9. Jeff Greenberg

    I have seen many occasions where the sellers have no clue on cap rates. Many time they price their property based on what the per door price was down the street. Now they will do that even though they have not raised rent in many years. They will exclaim how you can raise rents by $100 a door. So they want you to pay the value that it could be at rather than the current value. We don’t buy on proforma, but on actual value.

  10. Long khang

    Thanks for the post, I’m a newbie and try to buy more than 10 units, how many percent cap rate is good?

    Every five years have to refinance, what if the rate going up but the price going down and don’t have money to make the difference?

    • Michael Blank

      Long – the cap rate depends on the area you’re looking in as well as the type of asset (apt, office, retail) and it condition. The best way to determine the cap rate is from your brokers who should be able to tell you.

      If you need to refinance, yes, you need to make sure that the value is there to support it as well as the cash flow to cover the debt service.

  11. Seth C.

    It seems like you chose 10% Vacancies and debt and 55% operating expenses because you are thinking of B-/C+ properties. How would people change those numbers for other property classes? For example, would a solid B require using 5% and 50%? It seems like if we are too aggressive, it will come off as as excuse to low-ball rather than a valid argument… So how do we find the sweet spot?

  12. bob bowling

    You’re advertising a 8.5% cap rate for this deal. I’m not 100% sure if that’s fair for this area, but let’s assume it is. If you apply an 8.5% cap rate to the adjusted Net Operating Income, the valuation of the building is $1.75M, quite a bit away from the $2.4M asking price.

    Geez Michael. you fell right into our trap. We figured if we threw you a bone on the rents and expenses that you’d be all wet in the pants for your expertise in working the “deal”! ha ha We’ll gladly take your money, er offer of $1,750,000. I didn’t think this would work but obviously it did as the market cap rate is 12% so we SCORED. Thanks again for your generous offer.

  13. David Doiron

    Thanks Michael, great article. I’m a newbie in Multi-family, and boy does it seem like a huge jump !

    I’ve got a question: Let’s say I’d like the seller to finance some of the down payement, would you throw that into the deal analysis equation ? Or would you just wait until the offer is officially written down ? Because this will certainly affect the seller’s interest, positively or negatively.


  14. Paulo Tomas

    Hello Michael

    Thank you very much for the video and the artical. I’m interested in buying your Syndicated Deal Analyzer spreadsheet and the eBook “The Secret to Raising Money to Buy Your First Apartment Building”. Can you please direct me to the website for both.

    Thank you,


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