How Do I Begin To Learn How To Analyze A Deal? Brand New Member

5 Replies

Hello Bigger Pockets Community!

I am just getting my feet wet in this real estate game, and having read multiple "beginner" books, I find myself asking the same questions over and over: Where can I find deals to analyze? How can I begin to practice analyzing them? And what resources can I begin to use that I can learn what to look for in a property? Any feedback is greatly appreciated!

Hi Maxwell, I would start by going to Zillow or Redfin or Trulia and selecting a zip code near you. Then select a property. Usually a 3 bed 2 bath is best. I have been putting together an analyzer that compares how Turn Key properties compare. Here is what I have so far. I'm still working on it. 

The left side is what a popular Turn Key Provide in the mid west does, the Right side is what I do with investors. You can see that there are different ways to view things, with different results. After you have taken some time to see the flow of the investment you will have a better understanding of what to look for and what best suits your investment goals.

1) Assumption: Turn Key – Type 1 XXXXXXX Invests Mostly Passive Investment

2) Assumption: Turn Key - Type 2 PassiveIncomeGrowth.com Mostly Passive Investment
Assumption: Investor has to get financing from a bank or from Turn Key company Or Invests $80,000 cash Requires $16,000 cash plus closing costs


Assumption: Investor takes over seller’s loan (Subject To or Wrap) and does not have to get financing from a bank or from Turn Key company. No Bank, No Credit Needed

Requires $50,000 cash


Assumption: Turn Key company has found and rehabbed property and found renter to install



Assumption: Turn Key company has found property with equity and taken over loan with Subject To or Wrap. And found Tenant Buyer who puts $20,000 down, pays a premium lease and does all maintenance and repairs
Assumption: Goal Is Cash Flow with Eventual Property Appreciation


Assumption:

Goal Is Cash Flow, captured equity with Eventual Property Appreciation


Assumption:

Investment Amount $80,000



Assumption: Investment Amount $50,000
Location: Columbus Ohio

Location: Phoenix Arizona
2,373 miles from Los Angeles

373 miles from Los Angeles





Investor 100% Profits (No Back End Equity)

Investor 100% Cash Flow & Back End Equity $$





Investor's Total 10 Year Return (Plus (Does Not include Tax Write Off's) $75,240
Investor's Total 10 Year Return (Does Not include Tax Write Off's) $249,971
Investor Funds LLC $80,000
Investor Funds LLC $50,000
Investor Profits $75,240
Investor Profits $249,971
Less Cap Ex (Roof, AC Unit, Landscaping, Water Heater, etc) -$$$
No Cap Ex (Tenant Buyer does All Maintenance and Repairs) $0
Investor sets up LLC

Investor sets up LLC
Investor Funds LLC $80k or applies to bank and hopes to qualify

Investor Funds LLC $50k
Turn Key locates & acquires property

Turn Key locates & acquires property



Turn Key teaches Investor Subject To, Wrap, Lease Options
Investor 100% Ownership

Investor 100% Ownership
Investor 100% Cash Flow

Investor 100% Cash Flow & Back End Equity
Investor makes management decisions

Investor makes management decisions
Investor collects rents, disburses

Investor collects rents, disburses





Property ARV $80,000
Property ARV $225,000
Purchase Amount $80,000
Purchase Amount $180,000
Cash Out - to Seller $0,000
(Cash Out - to Seller) $15,000
Seller Carry Back $0,000
(Seller Carry Back) $20,000
Bank Financing $64,000


Amount Cash Have To Put Down $16000
(Underlying Note Subject To) $145,000
Monthly Payment Out $419
Monthly Payment Out $995
Repairs & Maintenance $5,000
No Repairs or Maintenance $0





Sell Amount to Tenant Buyer $0
Sell Amount - New Tenant Buyer $245,000
Seller Carry Back (Paid when Tenant Buyer Refinances) $0
Seller Carry Back (Paid when Tenant Buyer Refinances) $20,000
Underlying Note Subject To (Paid when Tenant Buyer Refinances) $0
Underlying Note Subject To (Paid when Tenant Buyer Refinances) $145,000
Cash In – From New Tenant Buyer $0
Cash In - From New Tenant Buyer $20,000
Monthly Payment In – From Renter $550
Monthly Payment In – From Tenant Buyer $1,650
Investor Does Repairs & Maintenance $$$
Tenant Buyer Does Repairs & Maintenance (No Cap Ex) $0
Amount Tenant Buyer Owes Investor $0
Amount Tenant Buyer Owes Investor ($245k - $20K) $225,000





Monthly Payment In $550
Monthly Payment In $1,650
Monthly Payment Out $419
Monthly Payment Out $995
Monthly Cash Flow Investor Total $135
Monthly Cash Flow Investor Total $655





Vacancy Rate 80%

Vacancy Rate – None
Renters Occasionally Need To Be Evicted -$1,000
Note: Tenant Buyer puts down $20,000 Non Refundable – If the Tenant Buyer vacates the property – another Tenant Buyer is found with an additional $20,000 Non refundable down $20,000
Year 01 Cash Flow Investor - $135 monthly $1,620
Year 01 Cash Flow Investor - $655 monthly $7,860
Year 02 Cash Flow Investor - $135 monthly $1,620
Year 02 Cash Flow Investor - $655 monthly $7,860
Year 03 Cash Flow Investor - $135 monthly $1,620
Year 03 Cash Flow Investor - $655 monthly $7,860
Year 04 Cash Flow Investor - $135 monthly $1,620
Year 04 Cash Flow Investor - $655 monthly $7,860
Year 05 Cash Flow Investor - $135 monthly $1,620
Year 05 Cash Flow Investor - $655 monthly $7,860
Year 06 Cash Flow Investor - $135 monthly $1,620
Year 06 Cash Flow Investor - $655 monthly $7,860
Year 07 Cash Flow Investor - $135 monthly $1,620
Year 07 Cash Flow Investor - $655 monthly $7,860
Year 08 Cash Flow Investor - $135 monthly $1,620
Year 08 Cash Flow Investor - $655 monthly $7,860
Year 09 Cash Flow Investor - $135 monthly $1,620
Year 09 Cash Flow Investor - $655 monthly $6,000
Year 10 Cash Flow Investor - $135 monthly $1,620
Year 10 Cash Flow Investor - $655 monthly $7,860
Cash Flow To Investor $16,200
Cash Flow To Investor $78,600
Repairs & Maintenance (Roof, AC Unit, Water Heater, Painting, Appliances, Landscaping, etc) -$$$
No Repairs or Maintenance (No CapEx) Tenant Buyer Does All Maintenance & Repairs $0
10 Year Principal Pay down by Renter $11,940
10 Year Principal Pay down by Tenant Buyer $28,871





Cash Down - From Tenant Buyer $0
Cash Down - From Tenant Buyer – Goes into Investor’s Pocket $20,000





Tax Write Offs For Investors $$$
Tax Write Offs For Investors $$$
Appreciation Is Investor's -10 Year $40,000
Appreciation Is Investor's -10 Year $112,500
Note: Appreciation on a $80,000 property in Indiana at 5% per year is $4,000 per year $4,000 Year
Note: Appreciation on a $225,000 property in Arizona at 5% per year is $11,250 per year $11,250 Year
Investor Borrows From Bank$80k to acquire property $80,000
Investor Funds LLC $50k (From Cash IRA 401(k) for Property $50,000





Sell Amount to Tenant Buyer $0
Sell Amount to Tenant Buyer $245,000
Payoff Amount for Investor $64,000
Payoff Amount for Investor $180,000
Creates “Back End Equity” $16,000
Creates “Back End Equity” $65,000





Original Down – From Tenant Buyer $0
Original Down – From Tenant Buyer $20,000
Tenant Buyer – Pay Off Amount $0
Tenant Buyer – Pay Off Amount $225,000





Tenant Buyer Eventually Refinances $0
Tenant Buyer Eventually Refinances $225,000
Underlying Note Paid Off $64,000
Underlying Note Paid Off $145,000
Seller Carry Back Paid Off $0
Seller Carry Back Paid Off $20,000
Remaining Equity $16,000
Remaining Equity $60,000





10 Year Cash Flow To Investor $39,300
10 Year Cash Flow To Investor $78,600
Backend Equity – Investor 100% $0
Backend Equity – Investor 100% $60,000
Total $39,300
Total $138,600
Investor’s Amount Invested Investor's Total Return
From Tenant Buyer

10 Year Cash Flow

Principal Pay Down

Appreciation

Back End Equity

Total


Minus Repairs, Maintenance,

AC Units, Roof, Water Heater, Landscaping and other Cap Ex

$80,000 $75,240

$0

$39,300

$11,940

$40,000

$16,000

$75,240

-$$$


Investor’s Amount Invested Investor's Total Return
From Tenant Buyer

10 Year Cash Flow

Principal Pay Down

Appreciation

Back End Equity

Total


Minus Repairs, Maintenance,

AC Units, Roof, Water Heater, Landscaping and other Cap Ex

$50,000 $299,971

$20,000

$78,600

$28,871

$112,500

$60,000

$299,971

$0

Additional Investor Funds to buy Another Property in Year 1 $0
Additional Investor Funds to buy Another Property in Year 1 $20,000 (From New TenantBuyer’s DownPayment)
Investor's Net Return Profit $75,240
Investor's Net Return Profit $249,971
10 Year ROI 9.40%
10 Year ROI 49.90%
1st Year ROI Cash Flow 2.03%
1st Year ROI Cash Flow 15.72%
1st Year ROI Including Down Payment 2.03%
1st Year ROI Including Down Payment 55.72%





@Maxwell Milholland

Where can I find deals to analyze? - The MLS will obviously provide you will listings to analyze but the competition is high. Another strategy is to hunt off market deals. I'm currently listening to Finding & Funding Great Deals by Anson Young which I think can be very help for you. BP Podcast #218 with Erik Stark I also found very helpful. Instead of just sending out mailers, provide value while helping solve people problems.

How can I begin to practice analyzing them? - Just begin. Take action. It's really that easy. Find properties, use the BP calculators. Biggerpockets Podcast #279 - Andrew Cushman shared some ways he analyzes deals. I found his strategy very helpful.  

And what resources can I begin to use that I can learn what to look for in a property? - I think the above two answers also answer this question. Just keep digging on BP forums, BP YouTube channel, and the BP podcasts. Find topics that currently relate to what you want to learn then read, watch, or listen. 

Don't forget to read through the BP Ultimate Beginners Guide: https://www.biggerpockets.com/real-estate-investin...