How To Analyze Real Estate “Deals”

Deal analysis.

A skill that any savvy real estate investor needs to possess.

Being able to analyze the numbers on a potential rental property purchase quickly and correctly, while being fair and unbiased (don’t fudge the interest rate or exclude property management or forget holding costs, etc.) is a superpower.

At the end of the day, rental properties are like small businesses. They are made up of balance sheets and income statements. The less cash you need to spend to acquire an asset that will provide you with life-long revenue, the better off you will be.

A common request I get is to help analyze a property, either together with an investor or to share my thoughts about a property they are reviewing.

I’ve come to the realization that the most successful investors know a deal when they see one. In 30 seconds or less. They know quickly and they are able to act. This is because they have run the analysis on similar properties tens or hundreds of times before.

If you feel like you are in “no man’s land” when analyzing a property you see for sale (or an off-market deal that isn’t listed), and your gut is not sure whether it’s a decent deal, it typically means that you have not analyzed enough deals, or that you are missing some key info about the subject property.

Advice: Ask another investor for assistance. Post the numbers in an investor group. Ask your investor-focused real estate agent. Or find another way to gather feedback.

Keep practicing until deal analysis becomes one of your super-powers.