IRR, CoC, CapRate, or DTDMS ???

2 Replies

I know there are a lot of methods of analyzing a deal to see if it's worthwhile. Recently, I've been underwriting a lot of deals, trying to find my first 'big' (for me) MF property 40-100 units. I understand IRR, Cash on Cash, Cap %, etc. and how they can affect they can each paint a different picture.

Recently, a friend @David Preil, pointed out a different method called DTDMS (Does The Deal Make Sense).

It reminds me of the eleventh commandment--use your brain.

There are often many factors that will make or break a deal, even if all of the metrics look good on paper, but it requires you to dig a little deeper.

What are some of those things that have, or could make or brake a deal for you?

@Yonah Weiss

I understand numbers too, and I've been having this same discussion recently in regards to timing, tempo, DSCR, and cash reserves.

I try not to look at it statically with one deal.

For DTDMS, I think that there is a physical, spiritual, and emotional component too.  Over time, it's intuition or gut feeling.

For simplicity, you can start with, "Does this deal make sense for me right now?"  If there's hesitation, then try to determine why and resolve it.  The answer could be simply that you're missing key partner (knowledge/experience) or it would just be easier if you saved up for six more months.

In other non-real estate deals, I had to dig deeper to discover the source of irritation.  In some cases, it turned out that I didn't want to be in that domain doing those type of deals.  Rather, I was doing them for other reasons (pride, ego, duty, perceived expectations).


@James Michael Few Thanks for your perspective. You're right, sometimes there is an issue that comes from within, and not necessarily on the deal itself.