How To Analyze A Rental Property (The Quick & Dirty Way)

hey everybody its Brandon so I was just on the phone with a gentleman who was looking to invest in Waco Texas and so we were just talking about Waco a little bit so I pulled up brildor.com and I looked at the prices and I thought hey it's actually they're not that bad here and then I thought I'm gonna I'm gonna when I got off the phone with them I'm gonna run the numbers and just kind of see what Waco looks like for a small multi-family and then I thought hey why don't I record it and then put it on my Instagram so other people can head and see what I'm doing sound good so this one I go and I went to a while realtor.com it's just one website to find properties I typed in Waco Texas I searched and I up here at the top I chose property type multi-family let's do that and then I don't want to see the ones that are already pending or continuing so I'm gonna hide pending and contingent so now I'm left with just properties and make Waco Texas that our multi-family so we've got things from 753 35 to 39 kind of cool-looking property 325 kind of all over the place right I like and then there's this one on the right side here and this is the first one I have not analyzed it yet we're doing this live right now but I saw this one and it said $280,000 and there's another one here on the left it looks like and I thought this looks interesting cuz of the two-car garage typically this layout I like because usually not always but many times the water and the sewer is separated because these are newer properties I mean this was built in 2004 so chances are the water meters are separate which means I the landlord don't pay water which is always great for multifamily so I wanted to analyze this deal and again I just wanted to wait for you all to watch me do it so there are no interior interior pictures so I have to make some assumptions today so please don't go buy this deal just because I analyzed it but here that it says great opportunity and cougar Ridge to get your own home cougar Ridge it's funny and investment property at the same time this single-story brick duplex features two three-bedroom two-bath units located and coveted China Springs is D so it must be like a coveted coveted School District the units feature open floor plans with laundry hookups two-car garage fenced backyard for residents to enjoy the lake Waco Trail is just a short ride away and provides a great way to relax you don't wanna miss your opportunity one of the growing areas of Waco so I don't know anymore Waco but this looks like an interesting property around the numbers on so is that alright can we do that together so uh yeah I'm gonna go over here to bigger pockets come and click on tools the navigation bar brings in the calculators we've got like five main calculators fix and flip rental bird wholesaling and Rehab this is basically a rental it's already fixed up I'm assuming so let's go just basic the rental property calculator for buy and hold we're gonna call it a title I'm just gonna burn through this real quick not explain everything that I'm doing the Waco Texas duplex the address I'm just gonna copy and paste the address so in this case I already copied it into my clipboard so there it is just doing some basic copying and pasting at this point everyone here should be able to do that and taxes oh I don't know what those are well you know I'm gonna go over to realtor.com I'm gonna figure it out so if I scroll down realtor.com oftentimes it'll tell me there it is taxes about six thousand dollars just just shy of six thousand dollars so I'm gonna go and go six thousand dollars on this one I can add a photo you know why not I like adding photos so it's so add a photo in there and select our file go to my desktop there it is description I'm it's gonna put what the what the agent had wrote here that's good enough for me and that's it for page one let's go to page two what's it what's the purchase price well let's start with what they're asking they're asking two eighty two hundred and eighty thousand dollars what's it worth when it's all fixed up well it probably is fixed up so let's do that if you don't know how to find that hover over the question marks closing costs let's call it $4,000 in closing costs repair cost does that need any repairs there's always something let's call it $2,000 I don't actually know and I'm gonna put down a 20% down payment loan at four point we'll play four point five percent interest I'm gonna go amortize on a 30-year loan I'm not gonna do the other ones for now just to keep this quick and dirty now what about what are these units rent for well I'm gonna go over to rent ometer let's go to rent ometer that's a site that I use for quick and dirty numbers and let's put in the address here and let's see what they say on rent domitor for a is like twelve hundred I'm wondering twelve hundred for a three-bedroom house or duplex is that appropriate well let's find out in this neighborhood so according to rent ometer I just guessed at it but 1283 is average median is 1350 so we could potentially get up to a $1,350 that's good to know in fact a four-bedroom is up to sixteen fifty three which is crazy that's good so this is a high rent area I'm down below that I can look at some of the other properties to kind of see like you know how similar those are to mine but for quick and dirty right now let's go 1,300 I'm gonna go a little higher than the average because this is probably gonna be a little nicer and it's got that you know the two-car garage and all that but I'm not gonna go quite median so let's go 1,300 to keep it conservative right now let's find my where's my there it is so let's go unit breakdown at a unit a at a unit B and go 1,300 each does the listing say sometimes the listing will say what they'll what their current rent is yeah it doesn't really say that's okay let's see go back over here well there any other income is there like laundry income or anything like that probably not now remember I said earlier the reason I like side-by-side duplex is typically I think I said this earlier if not the reason I like side-by-side duplex is actually newer ones is usually the water and sewer lines are separated I'm gonna assume that's the case here that the water and sewer lines are separated and I'm gonna go ahead and just say that each tenant will pay their own electricity the tenants will pay their own water sewer and garbage I minutes to pay insurance probably gonna run me about $800 a month and then I'm I may in this case I probably won't sometimes on duplexes you have to do the lawn care but because they have their own garages and because they have their own yards I'm gonna make them responsible for their own lawn care so I don't worry about that either now vacancy I usually do around 5% repairs and maintenance anywhere between five and ten depent so five percent of the rent to ten percent of the rent depending on the age of the home now there's a newer property so I'm gonna go five percent same thing for capex this is like big-ticket items were gonna save up for a new roof every 20 years new you know plumbing every 40 years new windows every 30 years new appliances every ten years capex is just saving up for those items I'm at higher property manager 10% to manage the rent of that one and then I'm going to assume that we're gonna grow by let's call it two percent income growth 2% property value growth 2% expense growth and someday when I sell the property I got to pay real estate agent in closing costs that's sales expenses someday let's calculate the results and find out what happens here we go five four three two I have no idea my guess is it's not gonna be a very good deal as is but what I got like I always say every property has a number that could make it a good deal every property other number that could make it a good deal let's find out so here we go based on our numbers we just ran monthly income of twenty six hundred a month month expenses 23 eighty four which means our cash flow our estimated cash flows two hundred and fifteen bucks a month not terrible if you if you recall from my criteria thing the other day I said I want to get at least a hundred dollars per month per unit is my like baseline well two fifteen qualifies but remember my cash on cash return percentage I've said it twice now on Instagram lately I want a twelve percent return I am NOT anywhere close to twelve percent so you know I'm gonna do I'm gonna start crying and say there's no good deals in my market and go back to watch The Bachelor cuz I think that starts soon right after Dancing with the Stars gets done by guys kidding of course every number every property has the number so let's find it edit report let's find another number instead of paying 280 for this property what if we were to pay 280 let's what we were to pay 230 let's go crazy 230 now I know people are saying they're not gonna take a 50 thousand dollar discount probably not you never know right and this also shows why off-market deals are usually better let's check it out though check this out at 2:30 we're still only at a nine point six percent cash on cash return but our cash flows bump to 417 so we're getting closer now if I was getting a $50,000 discount I might be okay with a 10% return so we're probably getting close let's go let's jump it even more so this property let's go down to 210 again I doubt they're gonna take that but it's worth running the numbers and finding out it's also why I like the burst strategy cuz BRR you can usually get better deals but just I turnkey you duplex like this now at 210 I'm at the twelve point four seven so I'm probably out like a 220 now they're asking 280 I'm probably around a 220 to make this deal worthwhile now granted if I believe that this market is gonna appreciate really really hot then maybe I would have I would have accepted a lower cash in cash return maybe or you know maybe other reasons but looking at this chart like year 1 2 5 10 15 20 I mean if I bought this property at two hundred and ten thousand held on to it for 15 years look how much profit I'd have if I sold it over the course of those 15 years three hundred grand in profit is a fourteen point three five percent return I can see my equity climbing I can see my loan getting paid off I can see my property value going up over time I see my cash flow going up every year hopefully so I'm making about six grand a year from year one that comes at almost seventy three hundred by year five by year 10 off to nine thousand so you can see it going up over time so I know I just kind of a cool way to look at the deal so this deal to me this duplex I'd probably pay somewhere in the 220 230 maybe 240 range you know a maybe except in a slightly lower cash in cash return but maybe you're fine with it maybe you're good with a 5% return and you can pay the full 280 I don't know I'm not gonna tell you what to do what not to do but the one final thing you can also download if you don't know this with the BP calculators anyway you can download a PDF report like this and it shows you all those numbers nicely and neatly so that you can show a lender portfolio lender a hard money lender your spouse you can show anybody you want your partners that you've done your homework and this makes me feel really good so when I before I make an offer on a property I like to do this so there you go that is how I run the numbers quickly and efficiently and easily and accurately on rental properties and so it looks like in Waco you know it's not the end of the world they probably would say no but that's why this is just a numbers game it's just a numbers game so I might make an offer on this property and they'll probably say no but later on maybe they'll say yes if I offered on it maybe this has been sitting on the market a while or maybe I need to find a fixer-upper so I can build that equity in and get my cash in cash return higher because I'm going to do the Bur strategy I don't know anyway if this was helpful make sure you give that little thumbs up button or a little heart button below this video whatever I do and follow me follow us at bigger pockets everywhere follow me personally on Instagram have beardy brandon if you're not and I'm gonna get out of here cuz my little girl just made some snickerdoodle cookies and she's making me a heart-shaped one because she loves me thank you so much you guys have a great day [Music] [Music]

Channel: BiggerPockets

Views: 558,433

Keywords: biggerpockets, real estate, real estate investing, investing, rentals, rental property, investing in real estate, income property, bigger pockets, passive income, rental property deal analysis, analyzing real estate deals, analyzing real estate investments, analyzing real estate, how to analyze real estate deals, how to analyze a rental property, brandon turner, biggerpockets calculator, biggerpockets calculator rental

Id: 2uogn4qtZ8U

Length: 11min 30sec (690 seconds)

Published: Tue Dec 17 2019