How Do You Evaluate Whether a Deal Is Worth Financing?

Question

For those who flip or buy rentals, what’s the first thing you look at when deciding if a deal is finance-worthy?

ARV? Rehab budget? Cash flow?

I want to understand how other investors approach the early evaluation stage.

Andrew Postell · Answer

@Michael Santeusanio most of us take it from the angle of "What choice do I have?" So, yeah, if you have millions of dollars at your disposal...then you can finance any transaction you want without financing. If you are a like most of us, we have to leverage our properties as much as we can. We don't have a choice.

Does that answer your question?

JooYung Choi · Answer

Depends on risk tolerance but I like leverage too much. If I can find a MFH property that will cashflow with 5% down**, I am definitely pursuing. Of course I am only targeting appreciating neighborhoods = higher rents, ARVs, better tenant quality, etc.

**Cash flow when I move out of the house hack

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For DSCR loans, I have only purchased STRs so the cash flow has to be significant for me to pull the trigger.

Personally, I would never do a DSCR on a LTR. Just feel like I can get better use of that money with other investing avenues

How Do You Evaluate Whether a Deal Is Worth Financing?

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