How Do I Actually Practice Analyzing Deals

Question

Hey everyone,

I’m a college student trying to get a head start in real estate investing. I don’t yet have a full-time W2 job or know exactly where I’ll be living after graduation, but I still want to start learning how to properly analyze deals. Especially small multifamily (duplexes/triplexes) or single family.

Right now, I’m using Zillow to browse listings and doing basic math like subtracting the mortgage from potential rent to see if there’s any cash flow. But I know there’s way more to it than that, and I’m a bit overwhelmed by all the variables.

Here are my questions:

• What websites or tools are best for practicing deal analysis?


Are there calculators or platforms you recommend for beginners?
• Are there calculators or platforms you recommend for beginners?
• What metrics matter most when analyzing small multifamily properties?


Cash flow, cap rate, cash-on-cash return, etc.?


What does the "year built" tell me about a property? Why do new vs. old appliances matter?
• Cash flow, cap rate, cash-on-cash return, etc.?
• What does the "year built" tell me about a property? Why do new vs. old appliances matter?
• How do I compare a property to similar ones ("comps") easily?


Most sites don’t let me filter specifically for duplexes or triplexes — any workarounds?


Where can I find accurate rent comps for units like these?
• Most sites don’t let me filter specifically for duplexes or triplexes — any workarounds?
• Where can I find accurate rent comps for units like these?
• How do I tell if a neighborhood is high-growth or worth investing in?


What indicators or data should I be looking at?
• What indicators or data should I be looking at?
• If a house is one of the nicest or most expensive on the block, is that a red flag?


Is it better to buy the worst house in a good area rather than the best house in a weaker one?
• Is it better to buy the worst house in a good area rather than the best house in a weaker one?

What websites or tools are best for practicing deal analysis?

• Are there calculators or platforms you recommend for beginners?

Are there calculators or platforms you recommend for beginners?

What metrics matter most when analyzing small multifamily properties?

• Cash flow, cap rate, cash-on-cash return, etc.?
• What does the "year built" tell me about a property? Why do new vs. old appliances matter?

Cash flow, cap rate, cash-on-cash return, etc.?

What does the "year built" tell me about a property? Why do new vs. old appliances matter?

How do I compare a property to similar ones ("comps") easily?

• Most sites don’t let me filter specifically for duplexes or triplexes — any workarounds?
• Where can I find accurate rent comps for units like these?

Most sites don’t let me filter specifically for duplexes or triplexes — any workarounds?

Where can I find accurate rent comps for units like these?

How do I tell if a neighborhood is high-growth or worth investing in?

• What indicators or data should I be looking at?

What indicators or data should I be looking at?

If a house is one of the nicest or most expensive on the block, is that a red flag?

• Is it better to buy the worst house in a good area rather than the best house in a weaker one?

Is it better to buy the worst house in a good area rather than the best house in a weaker one?

I’d really appreciate any tips or frameworks for practicing this kind of analysis, even while I’m still in school and not quite ready to buy yet. I want to build the reps now so I’m prepared when the time comes.

Davide Migliorisi · Answer

The BiggerPockets Deal Calculator is a helpful resource specifically for evaluating small multi-family properties. Rentometer.com is also good for quickly getting rent comps around a certain area.

There are some common factors to consider when evaluating deals.

Cash Flow – This is your overall income minus all your expenses that you actually keep in your pocket at the end of the month after you have rented the property.

Cap Rate – This is your annual net operating income divided by your price of the property.

Cash-on-Cash Return – This is the annual return based on how much cash you actually put into your investment.

Rent-to-Price Ratio – A quick way to evaluate the potential cash flow of the property.

It's also important to evaluate the year built of the property. Older homes can lead to potential issues regarding items that may be breaking down (ex: roof, HVAC, plumbing), which increases your CapEx risk (capital expenditures = large costs of repairs over time working toward the replacement of these systems).

Meanwhile, newer homes (especially ones that have been fully rehabbed) will generally have a higher purchase price and probably offer a little less cash flow, but they will come with newer systems, which reduces the chances of random repairs in the months to come. It's about cash flow vs. sustainability.For comps, Zillow and Redfin are both useful. I suggest copying the comps into a spreadsheet so they show up side by side. Propstream is powerful but is really for an active investor it goes for $99/month. If you are trying to spot an up-and-coming neighborhood, study such things as  job growth, new infrastructure or commercial development, and population shifts. This will help you anticipate whether the spending power will go up or down or stay the same. Lastly, be leery of buying the best house on the block. The house can be overbuilt and command an improper resale value. Generally, buying the worst house in a decent area offers you the most upside depending on renovations or forced appreciation.

Aaron Maxwell · Answer

what about using chp gpt to help analyze deals