6 Effective Ways to Quickly Evaluate Real Estate Investment Property

There is a common saying about the real estate investment property market, “check out 100 deals, make an offer on 10 and purchase one”. 

As a beginner, you might be thinking how it can be possible for an individual to explore more than 100 properties just to get a single deal?

Well, frankly speaking, it is not that difficult. All that you need is the tricks on exploring the investment properties. You don’t physically need to see 100 deals in person; instead you can find 100 deals to evaluate. Of course, it will take some time to evaluate 100 deals, so we’ve tried making things easier for you to quickly evaluate deals.

Create a spreadsheet for quickly evaluating deals along with certain formulas. Your sole aim should be to be able to enter a few pieces of data and quickly analyze a property using multiple formulas.

Here are some ideas you can use to quickly evaluate a real estate property:

1.  Property Details

The first thing that you need to put in your mind when exploring the best deals is pretty straightforward. Enter basic information about the property. Create gray cells with user entry.

2.  Purchase Details

The next section into the spreadsheet may more of the financials.

The second section gets into more of the financials. Again gray cells need to be entered and orange cells with gray text that are calculated and black cells do not apply. This is a very important section that contains information about the property itself, the funding to purchase it and the cost to renovate it.

3.  Estimated Finances

We all know that we are going to prepare the spreadsheet in order to quickly evaluate investment property deals, use 50% as the operating expenses for the property. This is a great choice as it gives you the high level of how the investment looks. Make sure to target at least $100 estimated cash flow per unit.

4.  Calculated Financials

The next step here includes the calculated financials if you want to further evaluate the deal. You can create another spreadsheet where you can break down the operating expenses. This sheet will give you a calculation based on the actual numbers you enter for each line item. This step can be skipped when you are going the initial analysis.

5.  Rental Information
Sometimes, you may want to invest in a property for rental purpose. So, it is good to add this section that contains information about the number of rent able units and the going rate for rent in the particular area where the property is located. You can calculate annual rent and then divide that number by the total property cost to get the exact benefit you can get monthly from the rental income. This can help you calculate relevant information about the rental financials.

6.  Property Yield

When evaluating the investment property, the property yield is one of the main components to consider. You may come across multiple types of property yields and we set out the main two among them:

• Gross Yield – It is the income return on the investment before costs are deducted. It is calculated by dividing the annual rental income by total property price or value.                                                         
• Net Yield – It is the income return on the investment after costs have been deducted. You can get the net yield by following the simple formula >> subtract the property’s annual costs from the annual rent and then divide by the property price or value.

 Originally Published at InvestmentRealEstate.biz