Help analyzing a deal

6 Replies

Hello all, 

My husband and I are interested in a deal and have used the Bigger Pockets analysis software to evaluate the deal. Is there a way to post the pdf of the analysis here to ask for advice?


I believe the only way you can create a PDF of the Deal Analyzer report is if you're a Pro member. Perhaps you could post the most important numbers and ask about your concerns. There are plenty of folks here to help you analyze your deal.

@Tom Mole My husband has the pro account and cannot figure out how to post the pdf analysis that he has on his account to the forum to ask for opinions. He is at work now and asked me to try to figure it out. Thanks!

@Monica Corbett If you are going to be in real estate as either deal maker or investor, don't let yourself use software as your excuse for getting in the way of a basic task. 

Technology is only a way to expedite tasks. If it fails to do that, put it aside and do it manually, for now. Otherwise, it can become a bad habit and gain unconscious action pattern.

That said, remember that you are either trying to buy equity or cash flow at a discount. That's it. 

Here's a simple format that you can use: PETIO

Property - describes the asset's physical properties, use, rough as-is and ARV

Equity - identifies current mortgages and other liens of record and est. equity

Title - who is/are RECORD owner(s) now whether living, incompetent, deceased or missing 

Interest(s) - who might have an interest if record owner deceased?

Opportunities - how might you best monetize the opportunity?

IF you'll use this or a similar format the analyze your deals on paper, you won't have to rely on software and discussions with others online and offline become easy.

I agree with Rick, frankly, I can't see a "calculator" taking the place of a logical approach that requires objective thinking, there are two many variables that can not be plugged in as a simple formula. 

I was talking to someone the other day about step by step "programs" and it hit me, the light went off in my mind. 

I was talking to a university professor and administrator (who has dabbled in RE) and ask how do we make students today learn to think?

After some discussion, including right and left side brain activity, we blamed much of the inability to think in abstract terms to technology. If the student is in their 20's they have been using the technical approach all their life. The 40 somethings have been around the technical world back to the Delphi systems of the late 70's and 80's. 

That series on 1's and 0's doesn't include 1/2 or 1/3 or 5/8's as variables. You're either turned on or off. Great for science, not so great for art. 

Fast forward through psychological types, (Jung) to Gendlin and Rogers, brought "Focusing" as a training method, based on feeling instincts in thinking to arrive at logical conclusions. Students today lack the ability to be instinctive thinkers, they are more driven toward conclusions that are reached by explicit approaches, that step by step process as being on or off or as a flow chart stop or proceed. 

We are becoming more robotic in our learning processes just as our computers and devices operate. Turn on, go here, enter data here and here, then compute here, then the answer is displayed. 

Creativity requires instinctive thinking, it's not necessarily a step by step approach that can yield the best solution to problems. 

@Rick H. mentioned, reliance on calculators hinders your ability to think instinctively , objectively, you won't be able to adapt variables in reality that come to play in the analysis of real estate, or law, or economics, or finance or accounting or any other professional endeavor that requires intuition, abstract thinking or layers of relevance of variables in circumstances or situations. 

You can turn on your radio and search for a station. You know what you like and don't like. But, you can't really understand music until you understand the metrics, tempo, rhythm, tone, the symmetry that brings us to an emotional state. 

If you are going to stick you neck out, but yourself at risk, put your money at risk in dealing in real estate, you need to understand the foundations of real estate, you will not be successful simply being turned on or off. :)          

@Bill Gulley and @Rick H.

I am The said husband in this discussion. I greatly appreciate your feedback on this matter. Monica and I used the BP deal analysis software as a way to run the numbers to see if this deal makes sense from a numbers standpoint. In this process we also used intuition, instinct, objectivity, and common sense. Other than our primary residence which is a duplex, this is our first real estate deal. We are newbies. I hope that with experience we will be able to analyze deals better, and use the attributes you mentioned to the greatest extent. That being said don't sell out the "millennial" generation just yet. Yes its true that we have and will use technology differently than older generations, but we DO have the ability to think, to solve problems, to approach a situation objectively and all that other stuff you were talking about. 

As Rick mentioned, I will do my best to describe the deal with the PETIO approach.

Property: The property is a condo in a building with about 10 other units. It is set up in a townhouse style and is an end unit, so there is only one wall with another unit on it. The exterior is vinyl siding and brick with some wood trim that's nicely painted. It has 3 bedrooms and 2 full and 1 half bathroom. It was built in 1986 and has a poured foundation. It has a finished basement with a sump pump and also washer dryer hookups. The total square footage is 1400 approx including the finished basement. It has a 1 car garage with additional parking outside. The roof appears to be new within 10 years or so. The association fee is $100 and covers lawn care, snow removal, exterior maintenance, and exterior hazard insurance. The neighborhood is nice with many long term tenants and also many retired people, there is a large retirement community within the neighborhood. The neighborhood is about 50% single family dwellings and 50% multi family dwellings. It smells of cigarettes. We plan to paint, clean carpet, new appliances, new light fixtures and outlets. I went there today and spoke with an owner a few units down, he said crime is low, he has lived there for 5 years. He also said that everyone gets along and that there is fairly low drama. I could probably go on further with the property, but this is all I have right now.

Equity: We have it under contract for $42500. The county has it valued at $78500 for tax purposes. I estimate that the ARV will be $60,000. I'm not sure what you mean by current mortgages or why this applies to how i would determine if its a good deal or not, but i do believe the the current owner has no liens/mortgages. Monica and I plan to fund the purchase and rehab with a combination of our own cash and $15000 in borrowed money from a HELOC, on our primary residence, then we plan to refinance the property to get our cash out, pay off the HELOC then do another one.

Title: This is a good question and one that i should look into further. Its currently in the title of a trust. I believe someone died. I should be sure that no one else can lay claim to the property. I will be sure to be covered with good title insurance as well. Thanks for reminding me of this. 

Interests: Also not sure..need to find out, thanks for bringing this up. 

Opportunity: We plan to monetize the deal by renting the unit. 

Click here if you want to check out the numbers as we plan to make the purchase

This is a similar analysis which shows numbers after refinance

@Brian Corbett and @Monica Corbett

Now that's what I was talking about. The links you provided tell a lot about the deal. It's like you just turned the light on in an otherwise very dark room. Despite me being old, I'm not at all opposed to using whatever technology you can lay hands to. I'm not even going to risk arguing with @Rick H. about the value of technology (or the limits thereof). Just remember that your computer really doesn't care if you blame it when things go wrong. Success or failure is a human decision, but you seem to have addressed that nicely.

It looks like you did your homework and have pretty good idea what to expect. It appears to be a workable small deal, provided that your analysis is accurate against reality. What advice would you be looking for?

My biggest concern, not addressed by others, is this; do you have a cash-out refi plan? Have you talked to the banks? Most big banks won't talk mortgages on such small loan amounts. The local banks might. The problem is that tiny mortgages are hard to sell, so the bank has to carry their own paper. The big guys hate that. So, do you know who is going to cash you out?

Hey, great job on this deal! You may be newbies, but you're the kind of newbies that take action, real and meaningful action. Stick to it. Ride out the bumps. Soon you won't be newbies anymore.

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