The 5 Areas Investors Overlook When Analyzing Real Estate Deals

The 5 Areas Investors Overlook When Analyzing Real Estate Deals

1 min read
Matt Faircloth

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, N.J., is a developer and owner of commercial and residential property with a mission to “transform lives through real estate.” DeRosa creates partnerships to finance select real estate investments and has a proven track record of providing safe, profitable investment opportunities to their clients.

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 hundreds of units in residential and commercial assets throughout the East Coast. Under Matt’s leadership, DeRosa has completed tens of millions in real estate transactions involving private capital, including fix and flips, single family home rentals, mixed-use buildings, apartment buildings, and office buildings.

Matt is an active contributor to the BiggerPockets Blog and has been featured on the BiggerPockets Podcast three times (show #88, #203, and #289). He also regularly contributes to BiggerPockets’ Facebook Live sessions and teaches free educational webinars for the BiggerPockets Community.

Matt authored the Amazon Best Seller Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money. The book is a comprehensive roadmap for investors looking to inject more private capital into their real estate investing business and is a must-read for anyone looking to grow their business by using private lenders and equity investors. Kirkus, the No. 1 trade review publication for books, had this to say about Raising Private Capital: “In this impressively accessible introduction to a complex subject, Faircloth covers every aspect of private funding, presuming little knowledge on the part of the reader.”

Matt and his wife Liz live in New Hope, Penn., with their two children.

Matt earned a B.S. in Industrial and Systems Engineering with a minor in Business from Virginia Tech. (Go, Hokies!)

DeRosa Group’s YouTube channel

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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.

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!