All Forum Posts by: Damicco Robinson

I've noticed some investors having some issues efficiently and accurately analyzing rental properties. I thought I would provide a reference below to help out some investors who are struggling to determine what's a good rental deal. This information will be based upon buying a rental property in cash or hard money and refinancing out of the property via traditional lending (BRRRR Strategy)

Initial Phase Data Analysis

Purchase Price 

Rehab Cost

Rent Amount

After Repair Value (ARV)

Once you understand these data points then you'll have an understanding of how much equity you'll have into the home immediately upon completing your renovation.

Next Phase Data Analysis

Determine your Net Operating Income

Net Operating Income = Annual Income - Annual Expense

Typical Investor Expenses (Varies depending upon the investor): Vacancy, Taxes, Property Insurance, Property Management, Property Maintenance, Cap Ex (Capital Expenditures), etc.

Once you have budgeted for these expenses, you'll now understand what your NOI for this property is which gives you a much better indicator of how much money you're actually making.

Next Phase Data Analysis

Visit your financing terms. This obviously can vary from investor to investor.

Cash Investors: Purchase Price + Acquisition Closing Cost + Rehab Cost 

Hard Money Investors: Down Payment + Acquisitions Closing Cost + Origination + HM Fees + Interest During Hold Period

This phase of analysis would allow you as the investor to understand how much money you have into the deal prior to your Cash Out Refinance.

Next Phase Data Analysis

Refinance Terms: 

ARV Loan Amount: Lender's in today's market are lending anywhere between 70-80% of ARV

Term: 30 year Interest Rate: Under 4% with good credit and debt/income (assuming using a conventional loan)

This data will allow you to understand your Annual Debt Service or the amount you're obligated to pay to your lender annually.

Next Phase Data Analysis

After deducting the refinance fees from the loan amount, you'll understand what your Total Cash Out Amount from your lender will be. After learning what your total cash out will be, you subtract this amount from your total cash into the deal prior to the refi. This number will provide you with an understanding of how much cash you'll have into the deal after the refinance.

Last Phase Data Analysis

Go back to your NOI and subtract your debt service. This final number will give you your TRUE CASH FLOW!!! True Cash Flow is the amount of money you make monthly from a property after every single expense has been accounted.

P.S.

Saavy investors look at the following data points as the most important when determining whether or not to invest in a deal:

1. 1. Cash on Cash Return = Monthly Cash Flow / How much cash in the deal
2. 2. DCR (Debt Coverage Ratio) = For every dollar that you take to pay your mortgage, you make this number back in return (formula is Annual Rent / (Debt Service + Insurance + Property Taxes + Property Insurance + HOA if applicable)
3. 3. Cap Rate = Net Operating Income (NOI) / (Purchase Price + Rehab + Acquisition Closing Costs)

IF YOU HAVE ANY QUESTIONS OR DISCREPANCIES PERTAINING TO THIS ANALYSIS, PLEASE REACH OUT TO ME! ALWAYS LOOKING TO CONNECT WITH INVESTORS.

Hello @Alexis Keys!! Are you referring to conventional lending or hard money lender? Send me a PM and I'll connect you with both a phenomenal traditional lender and hard money lender depending upon what your needs are. 

Hello @Kaylee White! I appreciate your candor on this post. I often run into new investors who are in the same exact predicament as you are! I'm connected with a HM lender that doesn't run a credit check at all. He is an asset based lender and only looks at the numbers of the deal. Shoot me a PM, I would love to connect you with him. 

Hello @Shonari Wynter!! Welcome to the Atlanta area and to the world of Real Estate investing. Flipping here in the Atlanta market can be extremely lucrative but definitely requires you to have your ducks in a row. Feel free to reach out if you're looking to network with other investors, contractors or lenders within the space. 

Hello @Keith Liescheski!! Welcome to the world of Real Estate investing!! It's great that you were able to get in on the buy/hold side of the business by renting out your previous primary residence, perfect gateway!

I'm curious, are you interested in acquiring more buy/hold properties or are you looking to get into the flip business?

Hello @Jon Baker and @Randy Lee!! Great dialogue in regards to the Pittsburg neighborhood! I can 100% agree with you all that Pittsburg is still far from being the most aesthetically pleasing neighborhood within the metro area. However, I believe the driving factors in the rapid of appreciation in Pittsburg is a result a two different factors.

#1: Close proximity to the beltline and Pittsburg yards. 

#2: (More Important Factor) Breathtaking renovation designs.

Atlanta is a very trendy city in terms of home design and the Pittsburg investors are truly one of the leaders in this space. Just my two cents. 

Hey @Milan Dixon!!

Just curious, why haven't you considered acquiring properties in the Atlanta market considering this is where you live and work and obviously know the market better considering you're an agent?

Hello @Steven Van Ginkel and @Joe Jaques!! As someone who is extremely active in the Atlanta market, my piece of advice would be to work on perfecting your deal analysis in terms of speed and efficiency. To elaborate more, even though the market is one fire, there are still deals to be had within the Atlanta market; however, per everyone else's sentiment, larger more experienced investors are locking the good deals up immediately. 

If you can become the investor who is able to accurately and efficiently analyze a deal within a matter of minutes/hours you would put yourself in a much better position to be competitive. Savvy investors are receiving deals and analyzing them within minutes and then immediately going to view the property. Upon viewing the property, if their rehab estimate comes back anywhere within the ballpark then they are immediately making an offer. The offer made is not just the bare minimum they're willing to pay but the absolute most they're willing to pay. Per Joe, these properties are definitely going into a bidding war but the investor that offers the max he's willing to pay and is the quickest, he has a great chance of locking the deal up.

Please feel free to reach out to me directly. I can be a great asset to help you find you solid deals!!

Great information!! Thank you so much for sharing @Chad Carrodus!

Welcome to the market @Mohamed Bilal!! I would like to wish you the best of luck along your real estate journey. Shoot me a message. Let's chat!