Multi-family Investor · San Juan, Puerto Rico · Member since 2014 · 90 posts · 1 vote
I know how to run the numbers, but I feel like I'm not doing it like a pro or I'm lacking of confidence, and I would like to know is there a place or book that teach you how to do it correctly . Suggest me whatever you want, books, audiobooks, webinars, courses, etc...
The reason is because I want to raise capital and I want to feel comfortable and full of confidence, I think I'm doing the identify good but it lacks in something I don't know.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Numbers are important, but that is not where you begin.
Start with the basics, understand why one parcel of land is more valuable than another. Understand the function of a property, what benefit it serves and it's highest and best use.
Learn you market, prices and rents. Demographics of your area, what are the economic drivers of the area, where are the most through the least desirable areas and ask yourself why that is! What is the inventory like in different price ranges, different locations and demand? The first rule of RE is; location, location, location! Know why and how that rule applies.
Learn the physical parts of buildings, generally, you don't need to become an engineer, but at least know what a jack stud is or a header or top plate.
No building is perfect, something generally needs to be repaired or improved. Have a good idea what material costs are and what trades charge along with labor.
From that you can identify opportunities with specific properties.
Understand local RE requirements, state law, ordinances that apply to a property. Understand governmental influences on RE.
Now comes the numbers. Understand what comparable properties are, they need to be in the general area (or in a similar area further away) the need to be comparable in size, style, location, utility, functionality and within a value range. Comps need similar marketability traits, condition along with those aspects mentioned. Understand how adjustments are made for the differences between the subject property you're looking at to the comps selected.
The valuation process, consider the market approach from sales of those comps, the income approach from market rents and the replacement approach with depreciation taking age and condition into consideration.
So, there is a lot to cover before you look at financing a property and running the numbers.
RE isn't like selecting a mutual fund based on past performance and investment considerations as to what fills that fund. It's about dirt, location, functionality, demand, utility and transferability or rights.
After the valuation process you can begin looking at how to acquire rights to the use or title. Financial leverage, your use of funds, opportunity costs and the return on and of your investment.
Then you're looking at financing options. Equity for an investment property needs to be an earning asset. Look to holding costs over time, tax considerations and depreciation and expectations for appreciation need to be considered.
How you finance an asset over time needs to be examined over time to ensure the asset remains profitable. This is often assumed and shouldn't be so much, rents increase over time, but so do holding costs, costs of repairs, maintenance, taxes and insurance. What is the net income increase over time? When does depreciation for taxes become less of an advantage to a replacement property and is the method of financing fitting in with an expected holding period without additional financing expenses?
What are you exit options? Refinance and hold or sell and how do you sell?
If you can address these basic functions and aspects and show a secured position in a profitable venture, raising capital won't be so hard. Then you can play with your calculator! :)
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Numbers are important, but that is not where you begin.
Start with the basics, understand why one parcel of land is more valuable than another. Understand the function of a property, what benefit it serves and it's highest and best use.
Learn you market, prices and rents. Demographics of your area, what are the economic drivers of the area, where are the most through the least desirable areas and ask yourself why that is! What is the inventory like in different price ranges, different locations and demand? The first rule of RE is; location, location, location! Know why and how that rule applies.
Learn the physical parts of buildings, generally, you don't need to become an engineer, but at least know what a jack stud is or a header or top plate.
No building is perfect, something generally needs to be repaired or improved. Have a good idea what material costs are and what trades charge along with labor.
From that you can identify opportunities with specific properties.
Understand local RE requirements, state law, ordinances that apply to a property. Understand governmental influences on RE.
Now comes the numbers. Understand what comparable properties are, they need to be in the general area (or in a similar area further away) the need to be comparable in size, style, location, utility, functionality and within a value range. Comps need similar marketability traits, condition along with those aspects mentioned. Understand how adjustments are made for the differences between the subject property you're looking at to the comps selected.
The valuation process, consider the market approach from sales of those comps, the income approach from market rents and the replacement approach with depreciation taking age and condition into consideration.
So, there is a lot to cover before you look at financing a property and running the numbers.
RE isn't like selecting a mutual fund based on past performance and investment considerations as to what fills that fund. It's about dirt, location, functionality, demand, utility and transferability or rights.
After the valuation process you can begin looking at how to acquire rights to the use or title. Financial leverage, your use of funds, opportunity costs and the return on and of your investment.
Then you're looking at financing options. Equity for an investment property needs to be an earning asset. Look to holding costs over time, tax considerations and depreciation and expectations for appreciation need to be considered.
How you finance an asset over time needs to be examined over time to ensure the asset remains profitable. This is often assumed and shouldn't be so much, rents increase over time, but so do holding costs, costs of repairs, maintenance, taxes and insurance. What is the net income increase over time? When does depreciation for taxes become less of an advantage to a replacement property and is the method of financing fitting in with an expected holding period without additional financing expenses?
What are you exit options? Refinance and hold or sell and how do you sell?
If you can address these basic functions and aspects and show a secured position in a profitable venture, raising capital won't be so hard. Then you can play with your calculator! :)
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
12y
Originally posted by @Account Closed:
Anyone else?
Do you have any questions about the information that's already been provided? Is there anything specific that you're uncomfortable with or feel like you don't understand?
Multi-family Investor · San Juan, Puerto Rico · Member since 2014 · 90 posts · 1 vote
12y
@Steve Babiak Yeah probably, I'm still learning in this area (Do the math without software, preparing deals & raising capital) I didn't do the math when I got my first 2 properties, I used more creativity than this technical stuff. Right now I am not in the process of acquiring a new property, just learning "Getting better". Right now, I'm in the middle of a free course by J. Massey from Cashflowdiary about "Deal Reviews".
Real Estate Broker · Brandon, FL · Member since 2008 · 283 posts · 64 votes
12y
@Account Closed as @Bill Gulley mentioned, there are a lot of great resources and a lot to learn. My advice would be learn as much as you can and then take some action, you'll inevitably learn more as you go. I think most new investors feel they need to learn everything and then they'll go out and never make a mistake. I think a lot of the seasoned investors here on BP would tell you that they've made some mistakes along the way, but they learn from them and keep going.
Ask lots of questions and don't be deterred! Good luck with your investing!