The 5 Areas Investors Overlook When Analyzing Real Estate Deals

by | BiggerPockets.com

When you analyze a buy and hold property, one of the biggest pitfalls is overlooking various expenses and areas of the building. In today’s video, I share with you the top five most common factors that often get overlooked by many real estate investors.

Let’s jump into it!

1. Taxes

When you’re analyzing a deal, this is one area that I see overlooked a lot. Remember that real estate taxes are always changing. Some questions that you want to keep in mind are: When does the county/state reassess their property taxes? Can I appeal the taxes for a reduction? Who can get me the information I need?

2. Current Expenses

This is a tricky one. Most time when I see investors put together the numbers on a deal, they factor in the expenses that the current operator is paying. Keep in mind that current expenses aren’t static, which means that depending on how you plan to mange the property, your expenses might be more or less. Remember, your expenses will be catered to your management style.

Related: Help Me Analyze This Real-Life Deal That Just Came Across My Desk!

3. Turn Cost

These would be considered your upgrades or value-adds. This would also include your vacancy rate. Be careful when you’re putting the numbers together for this, especially if you have a single-family home. Take into consideration how long it will be to get one tenant out and another one in. If you’re in the single-family game, you should stay on the conservative side and factor in 16%, which is about two months’ rent.

4. Proximity to Assets

What can you brag about? For this tip, you’re looking at the property through the eyes of the renter. How do they feel about what’s around your property? Is it close to cool coffee shops, jobs, transportation, sewage plant, power lines? What would make the tenant want to stay in that area or not want to be there at all?

5. Unit Flow

How does the unit feel? Is it practical? Does it make sense? Picture yourself living in the unit you’re renting out. Would it make sense to live there? Do you have all the things you need?

Thanks for watching this video and make sure to leave your comments below and add any other overlooked areas!

Have a great and profitable week!

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area.

One of DeRosa’s mantras is “to make money while making a difference.”

15 Comments

    • Matt Faircloth

      Hey Christopher,
      Thanks for the comment. Have you considered raising your rents? If your vacancy rate is that low you may be leaving some money on the table. It’s a business decision really – charge market rent and get market vacancies and have to deal with them or charge below market rent and enjoy (almost) 100% occupancy. I’ve seen both strategies. We aim for the market but we do get vacancies more often.
      Matt

  1. Rob Cook

    Good stuff Matt!

    You point out how an eyes-wide-open approach is both beneficial and necessary. People seem to want “automatic” or “online” answers and information to solve all things these days. They forget how getting out into the hood can teach us more than we could imagine. Plus, thinking a little outside of the box, and acknowledge that most things, costs, and values, are not static, or at least should not be assumed to be so.

    Investing in Real Estate is as much an art, as it is a science. And therein lies the opportunity for smart operators.

  2. Carli Cummins

    Thanks Matt,
    Love your motto “to make money while making a difference.”

    As a cash buyer in NC, I check to see if the property is in a flood zone or flooded during our last hurricane! I have seen houses here underwater that historically have not flooded.

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