How I actually evaluate a deal, and why most people are doing it wrong, on both ends.

[JS Burnett]

Most people think they're evaluating a real estate deal when really they're just grabbing whatever data is easy and fast, while almost always being biased toward the answer they already want.

I've seen it a hundred times. Someone falls in love with a property, runs the comps that support the number they want to pay, squints at the roof from the driveway and calls it "good condition," and wires the money.

Six months later they're calling me.

Here's how I actually evaluate a deal, and yes, it takes longer than an afternoon.

First I walk it. Outer envelope from the ground. Roof, foundation, grading, siding, windows, every penetration I can see. Then the interior. Ceilings, walls, floors, mechanical rooms. I'm not touching anything yet. I'm just getting honest with myself about what category of mess I'm looking at. Off that walk I run real comps, build a preliminary offer, and make peace with the fact that number is going to change.

Then I get invasive. And I mean invasive. Underground plumbing. Every electrical circuit, switch, plug, and fixture. Every water valve. Every window glazing. Roof vents. Mechanicals run through their full range like I'm trying to break them. If it exists in that building I am checking it personally.

Everything I find becomes a line item. Not a category. Not "needs some electrical work." A specific problem, a specific labor cost, a specific material cost, a timeline, and whatever it takes to do it right, permits, engineering, MEP drawings, all of it.

Then the negotiation starts. And here's where doing the work correctly pays for itself ten times over.

When you sit across from a seller with a complete line item scope of work you are not guessing. You are not estimating. You are presenting documented facts about real problems with real numbers attached. Line by line. Try arguing with that.

Here's the part nobody talks about though, and it matters just as much as catching real problems.

Overestimating costs is just as dangerous as missing them. Maybe more. I see investors throw vague, inflated numbers at a scope of work because they're covering themselves, padding their downside, or honestly just don't know what things actually cost. Then they make an offer that's so far below reality the seller laughs them out of the room.

And word travels. Sellers talk. Brokers talk. Make enough embarrassingly low offers based on bad numbers and you stop getting deals sent to you. Your reputation in this business is your deal flow. Garbage in, garbage out, and everyone remembers the guy who low-balled them based on costs that didn't hold up to five minutes of scrutiny.

Real numbers protect you on both ends. They keep you from overpaying and from insulting someone with an offer that has no business being on the table.

More importantly, and this is the part most investors skip entirely, you can finally have an honest conversation with yourself about the ROI. Not a hopeful one. Not a "if everything goes right" one. An honest one built on numbers you can actually defend.

The deals that wreck people are almost never bad markets or bad luck. They are lazy evaluations dressed up as due diligence by someone who already decided they wanted the deal before they ever walked through the door.

Do the work completely. Or hand the keys back and go find something you're actually willing to evaluate.