How much analysis power does a newbie need to have ?

Question

David Faulkner · Answer

Because most of them are garbage, that is why. Because not understanding the underlying fundamentals that drive the numbers is dangerous, and building excel sheets from scratch can help you understand it, that is why. Often times in life and Real Estate investing, you will find that those things that seem cheap or free in the short term wind up in reality being the most expensive things in the long haul.

Lloyd Winston · Answer

Thanks for your feedback much appreciated.

Ray Lai · Answer

@Lloyd Winston

The important thing is to understand the math and different categories. Whether you do it in Excel or with software does make a difference. For example, if you are trying to put together a professional package to sell to other investors or if you are partnering up with other people, having a professional presentation (to a lender if you're borrowing money) makes a huge difference. Spreadsheets are great if you are just doing quick and dirty math to see if a deal is worth pursuing or analyzing further, but software that let's you put pictures of the deals and presents the analysis in a professional, and easy to understand manner could make the difference between getting a deal approved at your lender, or coming off as an amateur.

How familiar are you with the underlying math and calculations? Tools / spreadsheets / software are only as good as the user using them and are no shortcut for due diligence.

John Leavelle · Answer

Howdy @Lloyd Winston

It is not a matter of power!  It is a matter of understanding!  Do you understand the basic information you need and how to apply it to your analysis?  Can you conduct a basic analysis on a piece of paper or napkin?

Once you can do it on paper then you can use the tools (Rehab Valuator or BP calculators).

Daniil Kleyman · Answer

Lloyd Winston - why create excel sheets from scratch when Rehab Valuator is totally free for deal analysis? :)

Cody L. · Answer

First investment was bought sort of on accident.  Had two townhomes (call them "A" and "B") I was looking at for myself to live in.  Decided on "A".  Agent said "If you buy "B" as well, I know someone that would rent it"

I think I paid $210k or so and they were renting it for $2k/month.  This is in a popular area of Houston.  I did the quick math and realized that this would cover my costs (but not much more. But coming from San Diego I was shocked that I could find someone to at least cover the mortgage!).

I then realized that if I could get 1% of the purchase price a month, that was pretty 'break even' on a property.  But 'break even' wasn't bad (and on this property, I had two loans being paid, the 80% primary and a 20% second -- those were more common back then).  So again, two high interest loans being paid off, my money not even being used.  What's not to like.

And for all the appreciation only guys, that townhome has almost doubled in price in the ~10 years since I bought it.  Yet oddly enough, the rent income hasn't moved up much.  So someone couldn't buy it today and cash flow like I did.

Lloyd Winston · Answer

@Cody L. very interesting, did you analyze some sort of data set to make that conclusion prior to your first MF (multi-family) close?

Lloyd Winston · Answer

Thanks for sharing Ray much appreciated.

Lloyd Winston · Answer

Point taken thanks for sharing.

How much analysis power does a newbie need to have ?

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