Bothell, WA · Member since 2018 · 15 posts · 6 votes
Hey there BP Community!
As we all know from listening to the BiggerPockets podcast, we should be analyzing 10 properties a day! For us just starting out (like me) we can easily miss something or plug in some numbers that are way off. That's why I wanted to create a template to help me quickly run the numbers. I've analyzed some properties around my area, Seattle, as well as a few cities in the mid-west, each time I'm unable to find a deal (I'm looking on the MLS but still...) that meets the 1% rule or even has a respectable $100/mo cash flow.
It would be great to have someone look at it to help answer some questions: Is my spreadsheet off? Do the numbers look right? Is the spreadsheet helpful?
If you'd like to have a link please send me an IM, any feedback is greatly appreciated. There are screenshots below.
*I used Chapter 5 from The Book On Rental Property Investing for my numbers, specifically page 103 for the CapEx numbers.
If I am reading your numbers correctly you are saying that you are cash flowing $876 annually for a $53,000 investment plus your time, risks and unknown expenses e.g. loss due to vacancy, cleaning after a tenant destroys the property, painting, carpets, utilities when it is vacant, new water heater, furnace, air conditioner, leak in the roof, broken or leaking drain pipe, sewer, water pipe, gas leak, or replace or repair leaking faucets, broken screens, repairing locks, trash removal, city sewer use fees and a lot more. All this for a ROI of 1.6% and not the 3.75% as shown in your chart since $876 / $53,000 = 1.6%
The only way you can make a profit with this property is if it appreciates, significantly. I would rather put my money in CD's at 1% or clean tables at Mc Donalds and make $400 per week and bank the cash vs. $18 per week and work so hard and take such a huge risk that the unknown will not make your life miserable.
Never listen to the advice of others when looking at properties because you get a lot of very bad advice. I would never consider a property that does not give me a good clean 8% ROI annually, but my real goal is to earn 50% to 100% with my investment capital every year and that is very possible when you make that your business model and philosophy. If you don't set such a goal then stick with your 1.6% model and that is what you will get.
The way you earn 50% to 100% annually is by buying properties for slight discounts where you can double your investment capital. Suppose you purchase this $200,000 properties and you get it for $180,000. If you put $40,000 down and the property is worth $200,000 then you made a 50% profit on your $40,000 down payment.
If you are even a little sharper, you already know it is a buyer's market and with a little elbow grease and love you can turn this house into a $220,00 house in 12 months. Now, you easily made 100% on your money in 12 months because you put $40,000 down and you earned $40,000 by buying at the the right price.
How do you get a $20,000 discount on properties? Stop looking for homes that meet the 1% rule and look only for properties where the math gives you an annual return of 50% to 100%. Stop listening to real estate brokers b.s. when they tell you that every property they have to sell is a perfect match for you. Crunch the numbers for hundreds of houses and when you eventually you will be absolutely positive you found the house that will give you the 50% to 100% return. Don't be afraid to ask for a huge discount on every house you look at and don't listen to what your broker tells you because he is full of b.s. when he tells you a seller won't even look at your offer. If he won't make the low offer then tell the broker he is breaching any agreement you have with him to represent you and he is fired. Go online, find an offer form and make the offer yourself, or get another broker.
Believe me when I say I made millions of dollars by doing exactly what I preach when I say you cannot rely on brokers for good investment advice and you can make 50% to 100% on your money every year if you make that your business model and philosophy.
You will not even keep up with inflation if you buy properties with the philosophy that you are going to collect the rents and have tenants pay the mortgage. By the time the mortgage is paid you will pay tens of thousands of dollars for all the repairs listed in the first paragraph.
New to Real Estate · Seattle, WA · Member since 2020 · 3 posts · 2 votes
6y
Hi Nic - I’m pretty new too so may not be the best to review the spreadsheet though it looks quite impressive. Bigger Pockets has different calculators including estimating rehab costs that you can try up to 5 times for free. You could probably use that to compare to your spreadsheet as a gut check. It also shows graphs and other helpful metrics. I upgraded to pro membership partially to have unlimited access to those calculators. I’m actually in Mountlake Terrace so we are neighbors :). Happy to connect to help support each other in this journey!
If I am reading your numbers correctly you are saying that you are cash flowing $876 annually for a $53,000 investment plus your time, risks and unknown expenses e.g. loss due to vacancy, cleaning after a tenant destroys the property, painting, carpets, utilities when it is vacant, new water heater, furnace, air conditioner, leak in the roof, broken or leaking drain pipe, sewer, water pipe, gas leak, or replace or repair leaking faucets, broken screens, repairing locks, trash removal, city sewer use fees and a lot more. All this for a ROI of 1.6% and not the 3.75% as shown in your chart since $876 / $53,000 = 1.6%
The only way you can make a profit with this property is if it appreciates, significantly. I would rather put my money in CD's at 1% or clean tables at Mc Donalds and make $400 per week and bank the cash vs. $18 per week and work so hard and take such a huge risk that the unknown will not make your life miserable.
Never listen to the advice of others when looking at properties because you get a lot of very bad advice. I would never consider a property that does not give me a good clean 8% ROI annually, but my real goal is to earn 50% to 100% with my investment capital every year and that is very possible when you make that your business model and philosophy. If you don't set such a goal then stick with your 1.6% model and that is what you will get.
The way you earn 50% to 100% annually is by buying properties for slight discounts where you can double your investment capital. Suppose you purchase this $200,000 properties and you get it for $180,000. If you put $40,000 down and the property is worth $200,000 then you made a 50% profit on your $40,000 down payment.
If you are even a little sharper, you already know it is a buyer's market and with a little elbow grease and love you can turn this house into a $220,00 house in 12 months. Now, you easily made 100% on your money in 12 months because you put $40,000 down and you earned $40,000 by buying at the the right price.
How do you get a $20,000 discount on properties? Stop looking for homes that meet the 1% rule and look only for properties where the math gives you an annual return of 50% to 100%. Stop listening to real estate brokers b.s. when they tell you that every property they have to sell is a perfect match for you. Crunch the numbers for hundreds of houses and when you eventually you will be absolutely positive you found the house that will give you the 50% to 100% return. Don't be afraid to ask for a huge discount on every house you look at and don't listen to what your broker tells you because he is full of b.s. when he tells you a seller won't even look at your offer. If he won't make the low offer then tell the broker he is breaching any agreement you have with him to represent you and he is fired. Go online, find an offer form and make the offer yourself, or get another broker.
Believe me when I say I made millions of dollars by doing exactly what I preach when I say you cannot rely on brokers for good investment advice and you can make 50% to 100% on your money every year if you make that your business model and philosophy.
You will not even keep up with inflation if you buy properties with the philosophy that you are going to collect the rents and have tenants pay the mortgage. By the time the mortgage is paid you will pay tens of thousands of dollars for all the repairs listed in the first paragraph.
Bothell, WA · Member since 2018 · 15 posts · 6 votes
6y
Thanks Stephanie and Jack for your feedback!
@Stephanie Chu, that is a great idea to compare the spreadsheet to the calculator BP has, great way to validate the numbers.
@Account Closed, this is more a hypothetical deal but I'm saying the cash flow is is only $73.17/mo, row 18 "Cash Flow (Long Term)", and cash on cash return of only 1.657%, not a great deal and like you said I'd never buy a house with these numbers. My big goal was to make a spreadsheet that I could quickly analyze a property with and have a fairly accurate picture on the numbers for the deal. Also the 3.5% interest rate is the loan rate from a bank (or hard money), this would be adjusted based on the deal. The cap-ex line items are listed out in the bottom left using numbers from The Book on Rental Property Investing. Thanks for providing your input on the ROI you look for in a property, I'd definitely look for a property with numbers a bit closer to what you get!
Truth is, Excel sheets and BP calcs are helpful, but you need to know the market.
Keep it simple. i.e. Chances are if you can't run a quick analysis on a napkin, you need to learn more on where you want to invest and how much can you invest.
So there is your Excel sheet. Don't be so driven into the equations in the spreadsheet and calculating every cent.
Now if something looks good, then do a more thorough analysis, use Excel sheets etc. Then ask yourself, lets say, will you invest in a 150K property and receive only $100 cash flow? Consider the risk.
New to Real Estate · Los Angeles, CA · Member since 2020 · 38 posts · 28 votes
6y
@Nic LeTexier Amazing! That is definitely a good way to analyze. I prefer a simple notebook that I can carry around. It also feels good to see all those deals “in my inventory” even though many of them are already sold and off the market lol.
Specialist · New York City, NY · Member since 2019 · 399 posts · 168 votes
6y
@Nic LeTexier That looks like a great start. If you're interested, I can have a look at your file and will let you know if I spot any typos or calculation mistakes. Alternatively, you can also have a look at my fileplace where I saved a easy-to-use rental property analysis spreadsheet for investors: https://www.biggerpockets.com/...
That can give you some guidance or ideas for your own spreadsheet! Let me know if you have any questions!
Bothell, WA · Member since 2018 · 15 posts · 6 votes
7mo
I'm back, a few years later, but maybe wiser too... I have a new and improved real-estate analysis tool versus that spreadsheet. Hopefully it's still useful for everyone.
