Strategies for Analyzing Deals
Finding a deal is one thing, but it is often the underwriting and offering on that deal that can be complex. Because of this, we put together a quick analysis process to help you with your next deal.
Step 1: Obtain financials to look for any errors or trends in the numbers. Rent Rolls and T12's are great examples of financial documents to look at.
Rent Rolls: Breakdown every unit on a property displaying every unit line by line with details of each unit including tenant, square footage, rent, lease start and end date, unit number etc.
Trailing 12 (T12) Financial statement: A month by month breakdown of the past 12 months or performance on a property.
Step 2: Research Comparable properties. As you dig into your research, make sure to check the rent, utilities, upgrades of all properties and see where you can add VALUE.
Step 3: Enter your projections and assumptions into the REL software. Be conservative, but accurate.
Step 4: Enter conservative Financing terms. Make sure to check current interest rates.
Step 5: Look at the return on investment key performance indicator's and adjust the purchase price until you hit the returns that you need.
Finally, offer the price that makes sense for you. It may or may not be close to asking price. Stick to your guns, the numbers never lie!