How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
On Burning Your Mortgage
As you may know I co-own an insurance agency with my son. To say we have a varied clientele is to understate the characters in our portfolio. I write this first piece based on one of them.
Actually they are a couple who paid off their mortgage and were ecstatic. It turns out they paid their mortgage close to the day they had to renew their home owner policy. Pretty mundane stuff until the Missus made the announcement her and the old man were going to burn their mortgage.
They meant they were going to burn the original paperwork tehy received at the title company. You know, the papers that say it is over and done, you don’t owe us anything any more. It goes by Deed of Re conveyance and one or two other names but, no matter, it is an important document.
I know I don’t have to tell this audience not to burn those final papers but rather burn a copy of them if you just feel the urge. Regardless of the recording of the fact that you actually are out from under the mortgage monster you just may need to have that silly thing handy. Even if you never need it, keeping the original mortgage is a superb idea.
By the way, let’s say you are the proud parents of a paid in full mortgage. From an insurance perspective, don’t cancel your home owner policy either. While none of us believe our house will burn down or the tree on the south corner won’t get hit by lightning and collapse our roof, stuff happens.
So I don’t sound like I’m giving a lecture on insurance, I’ll move on to tidbit #2.
True Story That Happened In My Backyard
We have all been warned numerous times about NEVER hiring anyone who knocks on our door and tells us he will do such and such a job on or around the house for a bargain basement price. Since we live on a piece of property with numerous trees and bushes, trimming said nature’s gifts and raking leaves is part of ownership.
I guess my wife thought I hadn’t been attendant enough to these aforementioned chores because one day I came home and there was this guy whacking away at the bushes, pulling out some others and trimming the hedges. Not all at once but the remnants on the ground told me what he had done.
I walked into the house and asked who was the guy with the clippers hacking away at anything that looked like a bush. She said it was a guy who said he lived around the corner and he’d do all the “yard work” for only $XXX. She thought that was a good price and gave him the go ahead.
The answer to is he licensed, bonded and insured made my heart sink. Yes, it was no. This guy knocked on our door and was given the job. My wife said she wanted the place cleaned and spruced up and he said he would do it.
Mind you, wife mate is the one who lets her fingers do the walking through the yellow pages and checks out their licenses and references before she hires them to do the work. OK, used to check out that kind of namby pamby stuff.
To make a long story short, the result was a disaster. Lesson re-learned: NEVER hire a guy who knocks on your door and says he will do such and such a job on or around the house for a bargain basement price.
I mention this not to point fingers at my wife but to serve as a reminder because a momentary lapse like this one could result in a whole bunch of heartache, headache and backache. Imagine if he was hired to do a kitchen remodeling, driveway repair, etc.
In our area, we experience a lot of door knockers willing to do almost anything for a bargain basement price. If you are in the same boat, keep our adventure in mind. It will save you a lot of money, time and energy.
Photo Credit: doortoriver