I’m genuinely curious how people analyze property without using the BP Calculators? Do you have your own calculator you made?
Hey @Jaron S. , I created my own spreadsheet on Google Sheets. I basically put in the same outcomes the other calculators did and researched how to find them. Creating the spreadsheet really helped me learn how the numbers work.
I use an Excel sheet and BP
@Jaron S. I use the 4 square analysis, accounting for 25% of rent as an expense (capex/maintenance/vacancy). It works for me.
I've seen spreadsheets with bells and whistles and waterfall charts and ROI calculations that rival the complexity of my business development colleagues in a Fortune 500 company. It isn't worth my time to understand that.
I designed my own software
@Jaron S. Originally I made an Excel spreadsheet. Then I discovered BiggerPockets and it’s calculator and just realized how much better it was than my Excel spreadsheet was.
Ultimately I signed up for the Pro membership. I’m familiar enough with my area and rentals and real estate in general that I didn’t just go through and run 100s of sample properties like Brandon Turner suggests but if I get interested in a particular property I do get the information and run the numbers and play with them and create different scenarios to see what works.
For instance I’m looking at a property now that at the asking price it cash flows at like $20 which is why it’s not sold. Based on the calculator I’m going to offer a price it does work at which will horrify my Realtor but he’s used to me by now! Then we’ll see how it goes.
@Nick Barlow do you find that 25% usually works? Does it work when you purchase the property or does that end up too low at sometimes? Also, 25% with prop management or not?
@Nader Hachem that 25% is what I account for capex, vacancy, and repairs. Property management is a separate cost, and 10% is usually what I account for that.
It has worked for me for properties that don’t need a roof or foundation (ie high capex items) at time of purchase.
I've been REI for about 4.5 years, and only have one property that I'm doing a big capex repair (foundation) that we've owned for 3 years. If I added up all of the saved income from that one property using the metric above, that turns out to saving only 10-20% of rents (10% capex plus 10% maintenance): it's not enough to cover this one expense-it's roughly 2/3 of what is needed. However, the Cashflow produced by a handful of properties is enough to cover that expense on an annualized basis.
My goal is a cash out refi to source the funds, keeping the Cashflow as further reserves.