When I receive a deal and I plan to make a quick and dirty valuation what is the right approach ?
I always removed the additional income because I feel I should not value a property for lost key fobs or pet fees.
Also, when it comes to Expenses I left the expenses as is and mostly increased the management fee from 2% to maybe 3% depending on the size of the deal and I always adjusted the property taxes.
Is that the right way to quickly value a property?
I’m not sure why you would adjust the taxes. The management fee will be based on what is standard for the property type in your area. The best way to come up with this is call a few management companies and ask them what they would charge to manage the specific type of property you’re looking for.
When I evaluate what I can pay it is based on gross rent minus taxes,insurance, mortgage payment, cap ex, maintenance and vacancy. I self manage and don’t plan on switching to a management company until the mortgage is paid off. If the amount left over meets my per door income criteria then the property is a potential winner.
@John Dorma you should think through the income and determine what you believe you can collect. If the property has several units with pet fees and you will continue to allow pets then including pet fee income seems right. You also need to look at expenses and determine what you believe you can run the property at. 3% property management seems low depending on what your management setup will be and the property type. A lot of sellers will discount expenses so they can sell the property for more. You should determine every single expense that the property will have and figure out what is fair market value is when underwriting every deal. Always be conservative with your numbers (lower income and higher expenses). There are a lot of good posts or books available to give you more details about ways to evaluate properties or expenses to consider. Good luck.
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