Real Estate Consultant · NH · Member since 2019 · 27 posts · 5 votes
I am looking for input on methods being used to quickly qualify or disqualify properties. Spending a lot of time running numbers and wanted input from the community on what key metrics are being used to evaluate a property quickly so it either gets a deeper dive or it is scratched from the list.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y
Some use the 1% Rule. Goes like this:
Property must have monthly rent of at least 1% of the "all in" cost (purchase price + closing costs + rehab + holding costs). Example: If it rents for $500, spend no more than $50,000.
I use the 2% Rule. $30,000 "all in" rents for $600.
Most houses that do not meet at least the 1% Rule will not cash flow positive unless you pay cash or have a sizable down payment. It's a quick-n-dirty method, and there are others.
Michael can send me the analyzer to my inbox as well...Thanks
Newbie investor, looking at a townhouse (A rated) for rental in a excellent neighborhood with A-Rated schools...168K, 2BR, 3BA, however don’t think the rents will follow the 1% guideline more like 0.75....So thinking more about appreciation in 7-10 yrs....Thoughts from the BP community?
You should post this as a separate post
Look at end of this post for my comments on condos
Long Island, NY · Member since 2020 · 8 posts · 1 vote
6y
I'm a newbie to the site - and only read the last couple of posts on this thread, but i'm looking for help in understanding the numbers! I'm eager to jump into the rental investment arena, but i really want to master how to analyze the big picture. My question is on CAP rate. Based on the example used on the napkin on this blog https://www.biggerpockets.com/blog/2013-01-19-real-estate-math - how did they come up with the Annual Net number of $9,168? I thought annual net is monthly net x 12? The numbers here dont match. Can someone help explain?
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Lisa Maldonado, plenty of holes in that article. The way the author puts debt service in and out of her calculation is confusing (and why the numbers don't match, as you mention). One glaring error is that there is no accounting for Capital Expenditures, which are a very important part of analyzing any property.
Long Island, NY · Member since 2020 · 8 posts · 1 vote
6y
Thank you @Jaysen Medhurst - i feel better now! Any blogs on this site that you would recommend for this? I'm already registered for next Wednesday's webinar!
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
Next Wednesday's webinar should be all you need to get out of the gate, @Lisa Maldonado. I highly recommend setting up your own analysis spreadsheet from scratch. Then just analyze a few hundred deals!
Feel free to reach out by PM, if you have any questions.
I am looking for input on methods being used to quickly qualify or disqualify properties. Spending a lot of time running numbers and wanted input from the community on what key metrics are being used to evaluate a property quickly so it either gets a deeper dive or it is scratched from the list.
What helps me is to know what you are looking for in the first place. Then you can immediately start ruling things that don't fit out. Example, if you are looking for apartment buildings 100+ units built after 1970, you can immediately rule out deals that are too small and too old which don't fit your criteria.
Specialist · New York City, NY · Member since 2019 · 399 posts · 168 votes
6y
Having an optimized, powerful and easy to use spreadsheet is probably the best tool you can get to quickly analyse rental properties online and offline. I’ve been using mine for years and I’ve reviewed countless deals and made better decisions because of it
I’m obviously biased but overall spreadsheets still remain the best way to understand in detail if a property can be a home run or is an overpriced asset.