What are some great resources that cover the entire process of analyzing multifamily deals? I've been reading a lot of material and watching many videos on the topic, but I just want to see the process broken down over an actual deal and using real numbers. A lot of the videos just plug in estimated numbers and don't go over the process of actually finding the numbers to make a deal work. I am a visual learner and am just looking for something that shows this process being done!
I would love to see this as well. It would be very helpful.
There are various phases in the deal analysis process. One of the key questions you are trying to answer is: how much money should I offer in order for my targets to make sense. For you to get there, you need to usually play with 2 set of numbers: the first set of numbers are the ones given to you by the sellers and the second set of numbers are the ones that are based on your own research.
It is usually easy to get the first set of numbers, because any "serious" seller should have some of these numbers handy. Most of the times, these numbers have been massaged by the seller to make them look good or is other cases are incomplete. Those numbers should have things like Incomes (rent rolls and other income generating things from the property), and expenses (taxes, insurance, utilities, landscaping, property management,repairs and maintenance, payroll, Trash, ... etc). The exact list will really depend on the property itself and how it is managed. You plug them into a spreadsheet and it should be able to give you things like cap rate, cash on cash, ... etc
Then, the second phase consists of you trying to get your own version of these numbers. You would check the actual tax value of the property, which you usually need to adjust, then you can get a quote from an insurance agent, then you can use a more realistic vacancy rate. You can also get numbers such as trash removal expenses, landscaping expenses, property management expenses by making a few phone calls and matching them with the sellers numbers. Maintenance and repairs costs are a little harder to guess, but you can usually get a ball park number depending on the size of the rooms, ... etc. Finally, you need to use the location's typical cap rate to get a realistic offer price.
By putting these numbers side by side, you then have a clear idea why you are paying what you are offering.
If the ask price deviate too much from your numbers, then obviously ... it is not a deal.
You usually really want to spend less than an hour on this. As you become more proficient, this should take you less than 15 minutes to see if a particular deal is worth pursuing or not.
@Hunter Harms @Justin Rice I always try to share free information when it is out there but based on what you are looking for (actual deals, real numbers, visual learner) I recommend Michael Blank's Syndicated Deal Analyzer (SDA), which come with about 2 hours of video showing you the process on a real deal. He's got a little preview video here, http://www.themichaelblank.com/syndicated-deal-ana... that explains the spreadsheet and what comes with it.
In addition, his mastermind program ($49/month, however, his website was just redone and I don't see it on his website right now) has 20+ full videos showing apartment buildings, OMs and breaking down the deal. I was on a live webinar today for about an hour, questions were asked/answered, it is EXTREMELY helpful. This was $9 for the first month, $49/month after, cancel anytime. Absolute no brainer.
There is also a lot of good free info on his site as well as www.JakeandGino.com but nothing that dives in as deep as what you have described. Let me know if you have any questions.
@Hunter Harms Just Youtube and you'll be able to teach yourself most, if not all, of the stuff in the "deal analyzers" that are being sold. Most deal analyzers (not talking about one particular person) are super basic and are sold to supplement the income of the person selling them.
To be honest, most deal analyzers will not have material around IO payments, bridge financing and other slightly more complex issues. They will either not be covered (they sound hard but are not) or only sold to you if you join the super premium coaching/mentoring level (i.e. more money).
If you want to be successful, you will have to be running your own models. Most free models are used to illustrate a point and aren't really great when it comes to actual deals (many people here will differ... but it depends on the type of deal you are doing).
I would suggest:
- Listening to quality podcasts to understand the subtleties of your niche
- Read a ton of books
- Youtube: It will teach you visually as well provide you financial model shells. I guarantee you will have better financial models than 90% of the more "experienced" folks if you only follow this step for less than a month.
A side benefit of teaching yourself (again, it sounds hard but it isn't because this is very simple analysis... the real value-add is the reasonableness of the assumptions that are being used) is that you'll be able to develop your knowledge at a faster pace.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.