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How to Analyze a Cash Flowing Real Estate Deal

Like taking an MBA level course in real estate investing
Ryan Enk
58 students enrolled
English [Auto-generated]
Confidently negotiate deals that are a win for you.
Know how to value a propertyKnow how to price your rental rates.
Figure out by the numbers if you are making a good investment or not.
Learn how to negotiate using multiple data points
Setup your deals to minimize your risk and make it "passive"
Have the same knowledge of a real estate investing MBA

A comprehensive dive into real estate investment deal analyzing.  Everything you need to know to analyze a potential deal before you invest your money or move forward with more time invested.  The modules go into everything from ROI (return on investment) to CMA (comparative market analysis).  If you are new to real estate investing and interested in getting started with it OR you have some experience with real estate investing, this course will help you to learn new ways of analyzing the deals and coming up with the best way to present an offer to a seller and secure the deal! 

How to Analyze a Cash Flowing Real Estate Investment


STEP 1 BEFORE PROCEEDING TO THE FIRST LESSON:  Download the ROI Calculator spreadsheet in this Module

Understanding How ROI Works

-The most important number on the calculator is the ROI percentage.-It is calculated by dividing the total annual cashflow by the downpayment.
-It shows you how fast your money comes back to you.
-If there is no downpayment, then your ROI is infinity.
-Smart investors don't worry about appreciation or depreciation if they are investing for cashflow.  Appreciation is a bonus.
-You don't lose money on depreciation unless you sell the property.

ACTION ITEM- Decide on your target ROI.  10%? 20%? 30%? 95%?
Your target ROI will dictate your investment decisions.

General Overview of the Calculator

-Everything that is in yellow is what you can control and manipulate. Leave everything in white and green alone.-Sales Price- Can be negotiated up or down.  A lower sales price increases the ROI.
-Downpayment- The easiest way to effect your ROI.  In this spreadsheet, include any inspection costs and closing costs in downpayment.  I use a 2% rule.
-Loan Terms-This calculator automatically calculates your monthly payments.  A higher interest rate equals a lower ROI.  Longer term (months) equals a higher ROI.  Make sure to take the amount of years you will be financing your loan for, and multiply it by 12 to get the total months for the spreadsheet.
-Other Expenses
     -Insurance- property, hazard, flood, etc.
     -Miscellaneous- things like hoe warranty or any utilities.
     -Monthly Maintenance- A guess, but based off age and condition of property and appliances.
-Taxes- Can't be controlled, but you will learn how to find out what they are.
-Property Manager- Determines if your investment is passive or not. Your ROI can be manipulated by eliminating the property manager.
-Rental amount-The spreadsheet is made so you can ad up to 4 income streams.
-Total Expenses- This is your monthly payments plus your other expenses and property management fee.
-Monthly Cash Flow- Your monthly income minus your monthly expenses.
-Annual Income- Multiplies your monthly cash flow by 12.
-Return On Investment- Takes the annual cash flow and divides it by your downpayment and converts to a percentage.

CMA Overview and Tips for finding Comparable Properties

* Download the attached CMA Excel Spreadsheet

-A CMA is a Comparative Market Analysis.-Shows you how to value a house based on what other houses in the neighborhood have been SOLD for.
-Appraising a house is more of an art than a science.  
-This method takes training I received from a real estate appraiser and simplified it.
-Use sold properties within the last 180 days.
-In active markets with a lot of sold properties, use the last 30 days.
-Make sure the properties sold are in the same neighborhood, not necessarily the same "area".
-Use location, condition, age, and amenities to determine if the property is a comparable.  
-Use at least 4.
-How to find comparable properties?
   1) Ask a realtor to send you comps from the MLS.
   2) Use Zillow.com (not 100% accurate)
   3) Use Redfin (not 100% accurate)

Action Items- Practice analyzing a property.  Pick a property that you want to try to value on your own.  Ask a realtor to send you comps in the neighborhood, check zillow, and check redfin and start inputting the data onto the spreadsheet.

How To Use the CMA

-The first number that can be manipulated on the ROI calculator is the purchase price.  The CMA gives you definitive data to negotiate with.-The most important number is the AVERAGE SELLING PRICE PER LIVING AREA SQUARE FOOT.
-Everything in yellow is for you to change. Leave everything else alone.
-Input the addresses first, then age of properties.
-Living Square Footage vs Total Square Footage- Total is everything under roof.  Living is IN the actual living area of the house with AC, etc.
-Number of bedroom and bathrooms
-The asking price compared to the sale price shows you trends in the neighborhood on how things are selling compared to how people are listing initial prices.
-Sold Price- What the house sells for.
-Sold Price Per Square Footage- Shows the sold price divided by the living square footage.
-Property Condition- Get as close to the same condition as possible (New, Excellent, Very Good, Good, Poor)
-Amenities- Help determine how "comparable" the property is.
-Multiply the average sales price per square foot by the square footage of your house you are trying to value.
-Under a normal circumstance, my first offer is going to be on the lowest price per square foot of what has been sold.

ACTION ITEM- Get 4 comparables and input data into the spreadsheet to start practicing valuing a property.

Understanding Loan Amortizations and the Different Ways to Increase your ROI

- The calculator automatically calculates the monthly principle and interest payment for you.-Go to bankrate.com and look at todays interest rates.
-Download a loan calculator app on your cell phone and play with different financing options.
-Pay attention to how fast your "principle" is paid down per month.

ACTION ITEMS-  Go to bankrate.com and check out todays interest rates.  Get an amortization calculator and mess with the numbers to get comfortable with how loans work and how principle gets paid down monthly with different loan rates and number of years.

Ways to Manipulate Your Downpayment to Increase ROI

- Manipulating the downpayment can tremendously increase your return on investment. -Conventional Loans- Typically 20% down.  Conventional loans typically don't give you the best ROI.
-Look for other options than conventional financing.
How to manipulate your downpayment:
   -Conventional financing through a bank or mortgage broker.
   -Owner Financing- Getting the owner to become the bank for you.  Can be done regardless of whether or not the owner has a loan.
Tip- Ask owner to pay closing costs to increase ROI.
-FHA, Rural Development, and other loans are conventional ways to get into a property with a lower downpayment.  Ask a mortgage broker to give you all options.
-Owner Financing- "you name the price, I name the financing terms". 5% or less of the market is willing to do this.

-Contact a mortgage broker to see what kind of financing options are available to you.  
-See if the owner is willing to finance the deal.
-Experiment with different downpayment on the calculator to see how it affects your ROI.

Projecting "Other" Expenses

-Insurance, Miscellaneous, Monthly, and Taxes.-Insurance- Call Allstate or State Farm or someone you know in the insurance industry that can be on your "team" to give you estimates on properties. Ask the owner what they pay.
-Miscellaneous- Could be utilities, lawn care, HOA fees, Home Warranty, etc.
-Monthly Maintenance- Your inspection will give you a better idea of what to project for monthly maintenance.
-Taxes-  Ask the owner or go to your county tax assessors website or courthouse to find out what the taxes are on the property.
-Make sure to divide the annual taxes by 12 to get your monthly amount for the spreadsheet.

ACTION ITEMS- Start researching and projecting your other expenses and input them onto the spreadsheet.

How to Use a Property Manager and Why to Use Them

-Property Manager Expense- Typically 10% of the rental revenue on the property.-Eliminating this expense will dramatically increase your ROI, but I don't recommend it.
-A property manager makes your property a "passive income" investment.
- The property manager acts as a buffer between you and the renters.  Collects rent, evicts, finds people to rent your property, pays some of your bills, etc.
-Additional repair costs you will have to pay on top of the management fee.
-Recommend having an "authorized amount" the property manager is able to spend if a repair is needed.

ACTION ITEM- Google "Property Managers" in your area and interview property managers.  Decide if you want your investment to be passive or if you want to be involved to save money.

How to Project Your Rental Income

-Rental income- The spreadsheet allows you up to 4 income sources to project.-If your property already has a renter, you still may want to do a market analysis to determine if you can increase the rent.
-Use 3 sources to figure out what the house will rent for
    -Craigslist, Zillow, and MLS
-Look to see what's currently on the market in your comparable area.
-Look at the "Zestimate".
-On Craigslist.  go to "Apartments/Housing".
-Click on the "Map View"
-Calculate the lease price per square foot by dividing the lease rate by the square footage.
-Use the same principles to do a CMA to determine the lease rate

ACTION ITEM- Practice projecting lease rates for different houses on the market using these methods.

BONUS LESSION- Watch How to Quit Your Job in 12 months or Less w/ Real Estate

Thank you for taking the course.  Please don't hesitate to reach out if you have any questions.  If you are interested in more from me and how I help people to quit their job in 12 months or less with passive income from real estate investing, then please watch my free masterclass at cashflowdadlife.com.

Take Care!

Ryan Enk

You can view and review the lecture materials indefinitely, like an on-demand channel.
Definitely! If you have an internet connection, courses on Udemy are available on any device at any time. If you don't have an internet connection, some instructors also let their students download course lectures. That's up to the instructor though, so make sure you get on their good side!
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