Real Estate Deal Analysis & Advice

Rental Property Deal Analysis & Property Tour (Before & After Rehab!)

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7 Articles Written
red and white for rent sign in front of off-white-sided home

We just finished up a single family rental property. I want to bring you guys inside to show you my system and how we renovated it. I’ll also break down all of the numbers and financials on this property to show you guys exactly how much we’re going to make.

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Check it out in the video below!

Walk-Through of the Rehab

With our system, we fully flip everything—totally renovate it—because we want high quality tenants who are going to pay top rent.

The Basics

So, we re-did pretty much everything: floors, paint, trim. We did an accent wall, which is something we always do on all of our properties. In fact, if you watch my videos on YouTube, you’ll find that every single property we have looks the exact same as this. We just take this system and do it over and over again. It makes it really simple for us and my contractors to know exactly what to do.

And also, it attracts a high quality tenant. We know our clientele so well in my local area, and they really, really like this style. So, we’re just going to keep rolling with it.

The Kitchen

In the kitchen, we gutted the old kitchen that was falling apart (as you can see in the clips). Everything is brand new. We always do the shaker-style white kitchen (that’s the modern touch that’s in) with the granite-looking countertop. We never use granite or a hard surface countertop on a rental property, just because we don’t want tenants to ruin it with stains, as they can seep into quartz or granite.

So, we did a laminate countertop with this big, square sink. Another thing we’re trying to do now is not use the cheap doubles sinks from Home Depot, where they’re rounded. We’re getting the square, modern one. It looks pretty cool. We do a black restaurant tap always, so we’ve got that black accent, and then the stainless steel/black appliances. It turned out pretty good!

Related: Video Walk-Through: How to Analyze an Investment Property

The Basement

Now, the basement. We took off all the paneling on the walls. I think on the ceiling there was some sort of ceiling tile—I can’t remember. But we took it all down, drywalled everything, and put some spotlights in. We made it look way more modern—just a better space for the tenants to hang out in and have their kids play.

5000-renovation

The Upstairs

Upstairs, we carried the theme all the way through. We didn’t go as wild in the bathroom as we normally do. Typically we tile all the walls and everything, but in this case, we kept it because it was pretty clean. So, we kept the tub, cleaned up the caulking.

What we did do was replace the floors here with the white octagon tiles like we always do. We did a new vanity, new mirror, new lights—just painted everything. Nice and easy; in and out.

The Bedrooms

In the bedrooms, we carried the theme all the way through again—new floors, new trim, new doors. We always use the six-panel doors. It’s just a more modern touch with the black handles. It’s all about those little details.

Related: Introduction to Real Estate Investment Deal Analysis

Break Down of the Financials

Alright, guys. Let’s get into the numbers now that the project is done. I can show you exactly where we stand.

The Numbers

  • Purchase Price: $337,500
  • Down Payment: 20% or $67,500
  • Renovation: $35,000
  • Closing Costs/Lawyer Fees: $1,700
  • Land Transfer Tax: $3,648
  • Sleep at Night: $1,800
  • TOTAL: $110,148

We bought this property for $337,500, which is an outrageous price in my local area for a semi-detached property like this. That was a smoking deal. It was just one of those diamonds in the rough.

It sat on the market for a bit. We jumped right on it with a firm cash offer and blew the seller away. They were so happy, but we knew in the background, we were getting a great deal. So, it was a win-win for everybody.

The down payment for 20 percent was $67,500—kind of standard all across North America, right? Twenty percent down payment on a residential investment property.

For the renovation, we spent just under $35K. That was including everything you saw: paint, floor, trim, kitchen, doors, everything. Top to bottom, we refinished the whole basement, as well.

Closing costs or lawyer fees were $1,700. Again, kind of classic price for my lawyers here; that’s kind of standard for what we’re doing.

Land transfer tax on this was $3,648. If you don’t know what land transfer tax is, here in Canada in my local market, we basically have to hand over a check to the government every time we buy a property and the title changes. It’s kind of a cash grab, but that’s the way it is.

wooden model of house on desk with coffee cup, calculator, laptop

The sleep at night fine was $1,800. So, every single time we buy property, if you don’t know what the sleep at night fine means, we put one month’s rent in the property’s bank account.

By the way, every property you buy better have its own bank account. Every single one! It keeps it easy—nice and neat for our bookkeepers and our accountants (and also for you). So, don’t forget to do that for every single property.

But when we buy property, we put one month’s rent in that bank account for a rainy day. Maybe a tenant moves out, and it is a month or two layover, where there’s no rent. Or maybe a tap breaks or something else breaks in the house. We have the money.

This is more sophisticated, but if you have joint venture partners like I do, all my partners are bringing all the money to the deals. I’m kind of structuring the whole deal, making it work. So, I want my partners to put this in there, because if something does happen in the future, I don’t have to look stupid by going to them, knocking on their door and saying, “Hey, we need another $2,000 or $3,000 or whatever to fix this.”

We already have a good amount of money in there at that point. And every single month, we’re putting the cash flow into that bank account, which I’ll get to in a second. We’re just building and building that reserve. That’s how we do savvy real estate business, right?

So, the total investment on this property to purchase it on day one with everything included was $110,148. Again, if you watch my videos and you watch my break downs on the properties, this amount seems to be a common theme for single families. This is kind of standard for the deals in my local area.

The Monthly Payments

  • Mortgage Payment: $1,138.31
  • Property Tax: $197.58
  • Insurance: $90
  • Property Manager: $95
  • TOTAL: $1,520.89

Let’s get into the monthly payments, which is the most exciting and probably what you guys want to see the most.

The mortgage payment on this is $1,138.31. That’s calculated on a 3 percent interest rate amortized over 30 years. Again, a classic structure in Canada for investing properties.

Our property tax on this is $197.58. Insurance is 90 bucks per month. Our property manager is $95 a month.

Yes, every single property that we do is handed over to a property manager. Our job as real estate investors is to grow our business, find more money, find partners, find deals. We don’t want to spend our time managing properties, changing toilets, chasing tenants for rent.

You know, I started off doing that myself when I had one, two, three properties. I kind of did that, and I suggest that for you, as well. If you’re a new investor, just so you can learn how crappy it is to be a property manager, do it. Then, you’ll eventually pass it off and respect your property manager for that crappy work they have to do.

But you want to eventually spend most of your time growing your business. You are the CEO of your real estate investing business. Your job is to find more money and find more deals and grow this business. Don’t be stuck doing this kind of stuff.

The Monthly Cash Flow

  • Expenses: $1,520.89
  • Rent: $1,800
  • TOTAL CASH FLOW: $279.11

Total, our expenses per month are $1,520.89. Our monthly rent is $1,800, which leaves us with a cash flow of $279.11 per month. Not too bad! It’s actually a pretty good single family cash flow for my area.

But we’re not really gonna get rich on this. This is a long-term game for the single family property. So, that sleep at night fund I was talking about, every single month, we’re putting $279 in that reserve fund, just building that up.

And the way we structure our deals and my partnerships is we’re not drawing the cash flow every month. What are we going to do with $150 or so each every month? We’re not going to have a smashing party; we’re not going to retire on that.

We’re banking all of that money, growing that cash flow. And then, when we sell it—typically in three to five years for my partnerships—then, we’ll split all the cash flow 50/50, as well as the mortgage paydown and the appreciation (all the benefits of real estate investing).

That’s the break down. This property turned out really well. It’s now a great addition to our portfolio.

I hope you learned something!

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If you liked this, hit “like” on the video above, subscribe to BiggerPockets’ YouTube channel, and let’s talk in the comment section.

Let me know what you think below!

Mat Piche is a real estate investor, certified carpenter, and Realtor, specializing in single-family investment properties in Canada. He currently owns 27 rental properties and is also flipping homes on a regular basis on top of that. At 30 years old, Mat became a self-made multi-millionaire from real estate investing. He has his own YouTube channel, where he shows his followers how they too can achieve financial freedom through real estate.

    Steve B. Investor from Centralia, IL
    Replied 28 days ago
    Hi , great video. Thanks for sharing. Where is this located? Where I’m at a house that price would have 2-3 times the property taxes and insurance costs.
    Mat Piche Flipper/Rehabber from Kitchener, Ontario
    Replied 25 days ago
    Hey Steve, I'm based in Kitchener, Ontario, Canada. One hour south of Toronto.
    Daniel Dietz Rental Property Investor from Reedsburg, WI
    Replied 28 days ago
    Good Video. AS with the above commentator our taxes would be about $800 per month and Ins. about $200 or so. Could you explain a bit more what you think the ARV is or what your "exit profitability" is? When we do partnered deals, on a deal that has them bring 100K (a pair of nice duplexes in our are) we are going to be bringing in about $3600 month when financed over 30 years @ 4%. We figure if we exited it @ 5 years (we plan to hold longer though) we would need a 'total return' - meaning cash flow, loan paydown, and appreciation of about 125K. That way they get there 100K back and we split the returns 50-50 or 62K each. This give us a compounded return of about 10-11%. Wandering how yours stack up? Thanks, Dan Dietz
    Mat Piche Flipper/Rehabber from Kitchener, Ontario
    Replied 25 days ago
    This particular property will be worth 400K right when we're done the renos. The average appreciation rate in my areas is 5% a year, however, the past couple of years have been 10%+ a year (won't last forever though). Rent is $1800 a month, which we just filled with a tenant a few days ago. Single families aren't really a 'get rich quick' with cash flow. These properties are for slow and consistent (almost guaranteed) growth. These are the foundation of my wealth. We also invest in "cooler" properties with much higher cash flow haha. The idea is to have 15-20 of these (which we do have) boring ones in the background while we go off and build cash flow
    Brendan F. Nagle
    Replied 28 days ago
    279 a month CF. = 3348 a year. 3348/ 110148 = 3.03% Cash on Cash return. Is that similar to other deals you operate? Your banking on Appreciation pretty hard, with loan pay down being limited in the first 3-5 years of 30 years amortization. maybe that's what your market holds but the deal you describe is basically a Treasury Bill minus any guarantee, 3% and you can't touch it for 3-5 years. I may be missing something, you didn't talk/include forced appreciation or your estimation of future appreciation. Also with your 50/50 partnerships, assuming the partner came up with the full 110,000. To get a 10% COC return on money over 5 years the Sale price + delayed CF+debt pay down would have to equal over 120000 (total/2=Partner$). In my opinion, with the info only provided in the article and video, its a safe bet for you, but very dependent on significant appreciation increase for the investor.
    Mat Piche Flipper/Rehabber from Kitchener, Ontario
    Replied 25 days ago
    Single families aren't really a 'get rich quick' with cash flow strategy. These properties are for slow and consistent (almost guaranteed) growth. These are the foundation of my wealth. We also invest in "cooler" properties with much higher cash flow haha. The idea is to have 15-20 of these (which we do have) boring ones in the background while we go off and build cash flow. You're also forgetting about mortgage pay down on these properties. On average, my partners and I BOTH walk away with 80K profit after 5 years. Remember, these require almost no work or troubles once they're set up do to the high quality tenants these attract ;)
    Frank Boet from Miami, Fl
    Replied 28 days ago
    Good video. I think you said that the seller was thrilled with the cash offer, but you put a 20% down payment. We're you pre qualified for the loan? I'm sorry if I'm missing something. Thank you
    Jake Moran Rental Property Investor from Falls Church, VA
    Replied 27 days ago
    $279 cash flow without accounting for maintenance or vacancy reserves??
    Amer Mallah from Monkton, Maryland
    Replied 26 days ago
    This is my question as well, I'm looking at a deal that looks almost exactly the same numbers but I was going to pass because the reserves would make the deal cash flow negative - I'm a newbie so maybe I'm thinking about it wrong?
    Katie Rogers from Santa Barbara, California
    Replied 27 days ago
    Yeah, there are a few discrepancies in the story.
    Jake Moran Rental Property Investor from Falls Church, VA
    Replied 27 days ago
    That's a great looking kitchen though.
    Katie Rogers from Santa Barbara, California
    Replied 27 days ago
    It's a crying shame that you cannot simply send a change of title form to the appropriate land office in Canada. Instead they have this stupid online system that only a lawyer can access. Those lawyers charge a pretty penny because you are basically a captive to the cost.
    Logan Slone
    Replied 27 days ago
    I’m confused. You mention you made a cash offer on the property, yet you put 20% down and have a mortgage. This does not align with lying cash.
    Rob Cook Real Estate Entrepreneur & Coach from Powell, Wyoming
    Replied 26 days ago
    Good video, I like your format and appreciate the presentation. Your analysis methods are quite different from what I use. As many of the above comments touched on, it seems a little "off" in the following ways. You have no allowance/expense identified for 1) Capex, 2) Maintenance or 3) Vacancy. This could be disastrous quite quickly if there is a string of vacancies, and long term if there is a string of maintenance expenses or roof or HVAC replacements required. I use an extremely simple and strict 50% rule for all of my rental property analysis. (Note, my management cost is 10%, your is half that? and your taxes are way low compared to most in the US). SO, I would take the rent, cut it in half to cover the proforma typical 5 expenses at 10% each (Vacancy, CAPEX, Maint, Management and Taxes/Insurance). In your example of 1800 rent, I would assume I would have half, or $900 leftover to service debt and provide net cash flow. Simple, reliable, CONSERVATIVE (I would rather pass on marginal deals than fudge on my analysis and regret it for the next 10 years- most surprises in Real Property rentals are BAD!). If I require an 8% return on my investment (typical for mine) then then I crank the numbers, using ARV, rehab and holding costs, acquisition costs, and use the 50% rule cashflow to determine the most I will pay for the property. I can do that in minutes usually, and not waste time unless it passes that smell test. (I have been doing this for 40 years, so I can do rehab cost estimates, market rent rate analysis, and all of that VERY quickly in my market neighborhoods I work in). I hope this works out for you, because based on your analysis, you definitely have a risky investment there, 100% counting on appreciation to save the day (i.e., gambling).
    Tony Starr
    Replied 26 days ago
    I am an investor inSFR in Mn. and my opinion is you are better off putting your money in any other investment than the example above. You have $370K in a building and you rent is $1,800.00/mo. You would be reaching at $270K. Hopefully you can sell it for over $400K because it is not a good rental.
    Jaron Walling Rental Property Investor from Indianapolis, IN
    Replied 26 days ago
    You mention the property sat on the market for "a bit". What was the asking price and what did you offer? If it was a smoking deal I'm surprised you found it on the MLS.
    Noreen Eddy from Bergen County, NJ
    Replied 26 days ago
    US or CAD $? And did you replace the cabinets entirely, or just replace the cabinet doors? $35k is an entire kitchen where I come from, not an entire house reno...
    Tyler Labreche from Timmins, Ontario
    Replied 24 days ago
    Good job Mat always killing eh aha
    Scott Rucker
    Replied 17 days ago
    Great video. I’m curious about the rehab costs too. They seem low to me and I am in the Midwest. Did this include labor? Thanks for taking the time to document your flip - it looks great!