Real Estate Deal Analysis & Advice

The 5 Areas Investors Overlook When Analyzing Real Estate Deals

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
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When you analyze a buy and hold property, one of the biggest pitfalls is overlooking various expenses and areas of the building. In today’s video, I share with you the top five most common factors that often get overlooked by many real estate investors.

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Let’s jump into it!

1. Taxes

When you’re analyzing a deal, this is one area that I see overlooked a lot. Remember that real estate taxes are always changing. Some questions that you want to keep in mind are: When does the county/state reassess their property taxes? Can I appeal the taxes for a reduction? Who can get me the information I need?

2. Current Expenses

This is a tricky one. Most time when I see investors put together the numbers on a deal, they factor in the expenses that the current operator is paying. Keep in mind that current expenses aren’t static, which means that depending on how you plan to mange the property, your expenses might be more or less. Remember, your expenses will be catered to your management style.

Related: Help Me Analyze This Real-Life Deal That Just Came Across My Desk!

3. Turn Cost

These would be considered your upgrades or value-adds. This would also include your vacancy rate. Be careful when you’re putting the numbers together for this, especially if you have a single-family home. Take into consideration how long it will be to get one tenant out and another one in. If you’re in the single-family game, you should stay on the conservative side and factor in 16%, which is about two months’ rent.

4. Proximity to Assets

What can you brag about? For this tip, you’re looking at the property through the eyes of the renter. How do they feel about what’s around your property? Is it close to cool coffee shops, jobs, transportation, sewage plant, power lines? What would make the tenant want to stay in that area or not want to be there at all?

5. Unit Flow

How does the unit feel? Is it practical? Does it make sense? Picture yourself living in the unit you’re renting out. Would it make sense to live there? Do you have all the things you need?

Thanks for watching this video and make sure to leave your comments below and add any other overlooked areas!

Have a great and profitable week!

Matt Faircloth, Co-founder & President of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

    Christopher Smith Investor from brentwood, california
    Replied about 1 year ago
    My vacancy rate for 10 years has been substantially less than 2%. Don’t know what the future will bring, but I’ve never had a property vacant for more than 2 weeks, and most are filled in less than 1. Knock on Wood
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    Hey Christopher, Thanks for the comment. Have you considered raising your rents? If your vacancy rate is that low you may be leaving some money on the table. It’s a business decision really – charge market rent and get market vacancies and have to deal with them or charge below market rent and enjoy (almost) 100% occupancy. I’ve seen both strategies. We aim for the market but we do get vacancies more often. Matt
    Rob Cook Real Estate Entrepreneur & Coach from Powell, Wyoming
    Replied about 1 year ago
    Good stuff Matt! You point out how an eyes-wide-open approach is both beneficial and necessary. People seem to want “automatic” or “online” answers and information to solve all things these days. They forget how getting out into the hood can teach us more than we could imagine. Plus, thinking a little outside of the box, and acknowledge that most things, costs, and values, are not static, or at least should not be assumed to be so. Investing in Real Estate is as much an art, as it is a science. And therein lies the opportunity for smart operators.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    Hey Rob, You are correct! It takes getting boots on the ground and putting yourself into the heads of the prospective tenants to make a deal work! Thanks for the comment, Matt
    Brian Karlow Rental Property Investor from Algonquin, IL (Chicago suburbs)
    Replied about 1 year ago
    Great article Matt! Your “boots on the ground” experience always comes through in your posts…. Great stuff! Brian
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    Thanks, Brian!
    Brad Stribling Investor from Addison, Texas
    Replied about 1 year ago
    16% turn rate? If you run anything over 5% annually on your portfolio you’ve got some bad property, bad management or both.
    Brad Stribling Investor from Addison, Texas
    Replied about 1 year ago
    16% turn rate? If you run anything over 5% annually on your portfolio you’ve got some bad property, bad management or both.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    Hey Brad, You may have misread, I was saying that’s the “cost to turn” a vacant – 2 months rent. I go into more detail in the video, be sure to check it out! Matt
    Casey Christensen from Lehi, Utah
    Replied about 1 year ago
    Hey Matt – Thank you for posting the article and video. I havent done any deals yet, but this is great info to keep in mind as I underwrite deals going forward.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    You are welcome Casey! Do that first deal soon!
    Chequita Dobson
    Replied about 1 year ago
    Thanks Matt !!! Very Helpful
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    You are welcome!
    Carli Cummins Investor from Fayetteville, North Carolina
    Replied about 1 year ago
    Thanks Matt, Love your motto “to make money while making a difference.” As a cash buyer in NC, I check to see if the property is in a flood zone or flooded during our last hurricane! I have seen houses here underwater that historically have not flooded.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied about 1 year ago
    Thanks Carli! I love that idea about looking for prior flood damage, even on properties not in a flood zone. Good tip! Matt
    Simon Dupuis Investor
    Replied about 1 year ago
    thank you Great video!