This question is prevalent on the BiggerPockets Forums, and as you can imagine, everyone has an answer. And yet, this is a very difficult question indeed!
This will be a short piece, but I think straight to the point. Hopefully it gets you thinking in the right direction.
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.
I am not smart enough to outline all of the answers for you. The best I can do is point to some of the realities to be reckoned with in hopes that your creativity and problem-solving skills will take you the rest of the way.
First things first: Unless you are licensed to sell securities, you are not allowed to advertise investment opportunities, or you will put yourself at risk of getting into some serious hot water with the SEC. I know what you’re thinking—but an investment is what this is; how do I avoid that? And the answer is: You cannot sell investments. Nor can you advertise as such, period. Get it?
You can, however, tell a friend of yours what you’re up to, and when they ask you if there’s a way they can play along, you can have a conversation with them around your dinner table. I’ll leave it at that.
If I Offer High Enough Returns, Will People Jump In?
Well, I just told you that you are not allowed to sell investments or offer returns. If your friend is interested in knowing what you are doing with you part-time job in real estate, then once you’re done with dinner, you can take that cup of coffee into the office and show them your plans. Perhaps they find it interesting, or perhaps they’ll think you’re nuts, which is more likely…
But that doesn’t really matter because projections of returns do very little to attract dollars into deals. The reputation, and more importantly the track record of the person in charge of execution—which in this case is you—is of the essence.
Do You Have a Track Record?
If the answer is no, unfortunately you will have to be speaking to someone who really cares about you, wants to help you, and wants to participate in your rise. You will need to be talking to someone who knows and loves you, who believes in you, and for whom your success is as much of value as any dollar-denominated thing.
Do you have access to people like that?
Investors: Have you had success raising money for your deals?
Let us know your take on this subject in the comments section below.