How to make a confident offer?

Question

Aside from calculating the NOI, ROI, cash on cash return, and the comps. If someone needs to finance the conventional way, do they need to sit down with a broker and see what kind of payment they'll be making and at what interest on every property?

How else would someone know exactly what the expenses will be for each property? (Mortgage payments, tax, insurance etc.)

How else would someone know exactly what the expenses will be for each property? (Mortgage payments, tax, insurance etc.)

Kenneth Reimer · Answer

@John Spina jr John, what do you mean financing the conventional way? In general, most investors will reach out to an originator of some sort, and get quotes on debt from agencies, banks, private individuals, etc. After analyzing the debt component of a few deals, you'll start to understand at what term, amortization, and interest rate most quotes will come in at. With these numbers, and the offer price that you've made, will allow you to calculate what your payment will be.

Estimating expenses also has a lot to do with experience, or an experienced broker. Estimations are made based on historical averages, market area, age of the building, type of roof, size of units, unit mix, etc. Taking all these into account will allow the next investor to understand what they can expect as far as expenses. You can also look at a T12 or operating statement from the past owner to have a starting point. That being said, many investors mix capital expenditures with expenses for certain tax strategies, so understand before your jaw hits the floor that many T12s will be wildly inaccurate.

Feel free to reach out with any questions!

Kenny Reimer