How to analyze a property

13 Replies

Hello everyone I am new to BiggerPockets and real estate investing. I watched the BiggerPockets YouTube video on the 4 square method and I’ve been trying it on some properties for sale on the MLS in my area. Every property has negative cash flows. The video seems pretty simple I’m not sure if I’m messing it up or it’s just the market right now. I look at all expenses and use correct numbers. Property management in my area runs 8% and I use about $50 per unit per month for both maintenance and capital expenditures. Anyone have any tips for analyzing properties?

@Gunner Holtz I see it is your first post so welcome to BP.

Most properties will not cash flow, so that is to be expected.  you need to find the right types of properties and the right neighborhoods. Go to some of the investing groups in the area and see what other landlords are buying

If it was easy to find positively cash flowing properties without, someone on this thread would likely have bought them.  If you are avoiding "D" areas, you have to expect the vast majority of properties will negatively cash flow.  You may need to focus on where you can add value and raise rents.  If you can't raise rents and the property doesn't cash flow, then you move on.  If there are none in the area that cash flow.  Find another area.  I live in South Florida.  Suffice it to say most areas not only don't cash flow they are so negative that the only potential upside is speculative (not my bag).  Good luck 

I'd suggest using the calculators here on the site. Decide what method of investing you plan on going with implement it and run with it. Plug the numbers in and if they don't work edit the purchase price till it works. Now you'll have the purchase price number that will work for you. Take it to your agent or the owner. If the seller don't like your offer you just continue to the next. Hope this helps.

@Raul Velazquez Jr thank you for the advice. I’ve looked into the calculators on this site before but I’d like to learn the calculations myself. I’ll evaluate a property myself and compare with the BP calculators to make sure my math is correct.

I have used the BP calculator for several potential properties after listening to Brandon's webinars.  After running numbers, it seems he's very unrealistic about his numbers.  He states you shouldn't purchase a property unless it cash flows $200 per unit and has a cash on cash return of 12% of more.  I can't find things that are remotely close to that as well as many, many of them are neg cash flow.  I saw responses that talk about "rent to purchase price ratio".  Not sure what a good number would be and a little confused as to remarks such as nothing as positive cash flow which is in direct contradiction to what Brandon purports for BP.  Any feedback?

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