I am analyzing my first deal and either it's a really terrible deal (it isn't, at least not to the extent the calculator shows where my expenses increase and my equity decreases over time) or I am not using it right. I DID watch the video on it. What other resources are out there to help me understand how this works?
Also, what is all this "back of the envelope" math I hear about? I've heard our BP experts talk about being able to analyze a deal in 5 minutes, but how can they do that when we are supposed to call around and get information like insurance quotes in our deal analysis? What am I missing?
'back of the envelope' would mean using rules or guesses instead of actual numbers. so, 50% of the rent will go toward non-financing expenses and costs: that's back of the envelope. you would never buy based on that - but you might disqualify a deal that way.
and yes, having actual numbers is best, and possible! you can usually find out the actual taxes, get an actual insurance quote, estimate the utilities pretty closely, etc.
here's an example of something you might learn and then re-use over and over. in my market, the utilities aren't usually totally split in many small multi, so i know i need to account for them - often sewer and water - in my numbers. typically $80-120 depending on the property.
another example - say you got an actual insurance quote for a 3 bed 1 bath single family in good shape. well, you could re-use that for future similar properties.
'back of the envelope' would mean using rules or guesses instead of actual numbers. so, 50% of the rent will go toward non-financing expenses and costs: that's back of the envelope. you would never buy based on that - but you might disqualify a deal that way.
and yes, having actual numbers is best, and possible! you can usually find out the actual taxes, get an actual insurance quote, estimate the utilities pretty closely, etc.
here's an example of something you might learn and then re-use over and over. in my market, the utilities aren't usually totally split in many small multi, so i know i need to account for them - often sewer and water - in my numbers. typically $80-120 depending on the property.
another example - say you got an actual insurance quote for a 3 bed 1 bath single family in good shape. well, you could re-use that for future similar properties.
I am analyzing my first deal and either it's a really terrible deal (it isn't, at least not to the extent the calculator shows where my expenses increase and my equity decreases over time) or I am not using it right. I DID watch the video on it. What other resources are out there to help me understand how this works?
Also, what is all this "back of the envelope" math I hear about? I've heard our BP experts talk about being able to analyze a deal in 5 minutes, but how can they do that when we are supposed to call around and get information like insurance quotes in our deal analysis? What am I missing?
I like to use this calculator personally. https://www.calculator.net/ren... It seems easier to me. I would also feel free to call your realtor and have them help you run through some numbers.
I am analyzing my first deal and either it's a really terrible deal (it isn't, at least not to the extent the calculator shows where my expenses increase and my equity decreases over time) or I am not using it right. I DID watch the video on it. What other resources are out there to help me understand how this works?
Also, what is all this "back of the envelope" math I hear about? I've heard our BP experts talk about being able to analyze a deal in 5 minutes, but how can they do that when we are supposed to call around and get information like insurance quotes in our deal analysis? What am I missing?
KEEP IT SIMPLY, gross rent less expenses divided by PP, thats your net income % If its a loan, than same , just take the difference in your payment and net,
Realtor · Northeast TN and Central VA · Member since 2021 · 50 posts · 37 votes
3y
My quickest "back of the envelope" is is gross rents x 100 is at or above the purchase price then it could be a good deal and is worth exploring deeper. Then you can look at how you can cut costs, increase rents, or strategically finance the property.
@J Scott: I know it’s not a terrible deal bc I know the comps of the area and what the potential MTR rental rate would be. But, I’m not SO confident that I wouldn’t run an analysis first.