Hello and Welcome.

We joined this community in hopes to get some real estate questions answered as well as answer questions that we can assist with. Our first inquiries follow:

Q1. How are realtors and investors alike out there calculating what a good deal is to those that are not good deals?

Q2. Do you use a cash flow analysis worksheet?

Q3. If so, could you explain the process when running the numbers for a subject property?

Q4. Could you post your template cash flow analysis worksheet here for others learn from??


All valid responses will be taken and digested at our next focus group meeting next week.


Thank you in advance,

From the Members of Active Resources

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"Being a millionaire starts with a millionaire mindset."

"DST = Do Something Today!"

"Before success comes in any man's life, he's sure to meet with much temporary defeat and, perhaps some failures. When defeat overtakes a man, the easiest and the most logical thing to do is to quit. That's exactly what the majority of men do."

"Edison failed 10, 000 times before he made the electric light. Do not be discouraged if you fail a few times."

"Fears are nothing more than a state of mind."

Actual numbers give for a deal have to be verified through due diligence. Often times sellers paint rosy numbers are OMIT certain important information to the transaction.

If you are buying residential homes it is more cut and dry than commercial.

I find that new investors often overlook the actual cost of financing when they evaluate a deal. I look at a minimum of three different financing options when running my numbers to evaluate a deal. When running the number, I also account for an extended holding period - one that is greater than average DOM - in case the market shifts while I'm doing the deal and I have to sit on the property longer.

I like to keep it simple. A good deal consists of:

1. More income than outgo.
2. Net zero cash out of my pocket.
3. Little or no ongoing liability.

I like your method.
Not only is it simple in working through the numbers, which allows you to really absorb the details of the potential deal, but it also minimizes risk.
Clever.

We'll bring this one up at our next meeting.
Thanks!

Real Estate investing is not about keeping it simple. That's where many get burned. There are many factors that need to be taken under consideration and careful analysis before you go through with a deal.

In your outlined steps you forget to mention...

equity,
rent,
LTV (Loan-to-Value),
Cash-Out Refinance,
Cap rate,
Taxes,
and overall ROI

These are things that make a deal sweet or not if the numbers don't work out to your advantage, or at the very least to everyone's advantage in the transaction.

AREsource,

LTV and Refi ---> I don't use credit.
Cap rate and ROI ---> I don't use cash.
Equity ---> Always nice but not necessary.
Rent ---> Not relevant to my niche.
Taxes ---> Included in 'outgo'.

So those aren't necessarily 'the things that make a deal sweet or not'. You might need to consider them but in my niche I don't.

OK, I'll bite... What niche is this??? Anyone?

I'm an investor - and I remodel & manage my own rentals. For me, 2 big things to consider is 1) how hard is this one to get ready to rent? and 2) will I have fun doing it?

I don't buy properties I would be unwilling to live in or buy in neighborhoods I would not want my family to live in.

Not sure any of that is quantifiable.

Options.

Well then, wouldn't you say that the Purchase Price we pay for the Option (Put or Call) is the equivalent of "Rent" we pay for the right to participate in the movement (appreciation or depreciation) of the Subject Commodity or Stock for the stated life of the Option?

Seems to be analogous to Interest which is a diminishing asset that we pay to "Rent" someone else's money; or better yet - "Rent" that they pay me to use my money.

That was the only thing that came to my mind (options that is), just thought I may be missing something. Probably am, many "somethings" in this world...

Vermont, that doesn't sound like something I would say, much too complicated

BrokerInfo, options are the only thing that come to my mind that fit the bill as well. I've done pretty much every kind of investing from traditional to creative and settled on options, specifically the option to buy and the option to rent, as my tool of choice for the reasons I pointed to...

1. Simple
2. Low risk
3. Flexible

And you can draft any kind of agreement in the form of an option, so you're not limited in the kind of deals you can put together.

I know far too many investors who complicate things no end, especially in the creative arena. Their ideas sound interesting but getting Joe Public to agree to them is a whole other story.

I always run a CMA first and determine the ARV. I never take the highest. Try to determine the closing cost as much exact as you can. it will ever some difference, but I have always been a around $200 margin. I always extend the holding period with a month.

My 2 cents: Any half-decent investor I know (myself included) doesn't buy at market value - so 1) knowing your ARV (after-repair value) and knowing what % of that ARV max you want your cost basis to be at is crucial.

2) I don't care what you invest in, even if you buy options, you should know your cash on cash return. If you put your own money to work, you need to know how much that money earns you, on an annual basis and the total return when you sell the asset.