How To Analyze Real Estate | Flips AND Rentals | Do You Have A Deal ?

Welcome back to the channel. In today's video, we're going to talk about how to analyze a property to make sure you're making the most when you're buying your next property. Coming up next. As investors, we must know how to evaluate real estate and make the best educated guess about how much profit each property will make, whether through profit Appreciation or cash flow? Knowing how to analyze properties will help investors make the best decision on buying and selling. Hi, I'm Joe. If you're new to the channel, welcome. I have over 40 years of real estate experience. I'm a broker, a mentor, and an investor. This channel is dedicated to helping new and experienced investors create the life they've always wanted through real estate. So make sure to subscribe so you never miss a video. The reason we want to be good at analyzing properties is because we want to determine our exit strategy. Real estate exit strategies are plans where an investor can decide how he wants to remove himself from the deal. The correct approach will maximize profits and minimize risk. Basically, are we going to flip, buy and hold, or wholesale? We're going to go over a few formulas to determine what is your best exit strategy. Okay. So we're going to start from left to right here. We're going to talk about a flip, and this is a recent flip that we did. 3-bedroom, 2.5-bath condo. From purchase to sale took about 60 days. So we closed, contractor went in 30 days later, put it back on the market, sold it the first weekend, and closed 30 days later. The original Maximum allowable offer, 70% rule. We figured that the ARV, the after repair value, was going to be $500,000 for this condo. So we could not offer more than $350,000, which we ended up getting the property for $350,000. In that in-between here, we've got 10%, which is what I use for rehab, and that's what it costs to rehab the property. It was pretty much gutted at the time we bought it, so we had to put everything back brand new, which is what we normally do. Closing costs and commissions at the end of the day are around $25,000. So profit on this deal was $75,000. Again, 2-month deal. This was actually on the MLS. Somebody had purchased it, changed their mind, we came in as a second purchaser. And close the transaction. So if this was not on the MLS and let's say a wholesaler had pitched this deal to me, it would have been the same numbers up here after repair value, rehab, and closing costs are the same. The only difference is that when we get down to the maximum allowable offer, the wholesaler is going to put in a wholesale fee, and that's usually around $5,000 to $10,000. So instead of making $75,000 on this deal, I would have made $65,000, and I'm happy with either number. Obviously, $75,000 is better than $65,000, but if somebody brings me a deal, this is what I look at. And yes, I would have done the same thing here. So now if we go into a rental situation, and rentals in California, there's not a lot of them out there that work. Sometimes they do. Again, depends how much money you put down and what you're going to do to the property. So we're going to take the same scenario here. Again, we got down here, we purchased it for $350,000. In, in the rental situation, we would have put a loan on it. In the flip situation, we usually pay cash or use hard money. So this is a more permanent financing, 20% down, payments around $1,695 or $1,700 a month. You know, we can rent it out for $3,000. A 3-bedroom, 2-bath here in Orange County rents out for about $3,000. I would probably put only about $10,000 into the rehab as opposed to $50,000 here, and the reason is I want to make it what's called rent-ready, and that is not $50,000 worth of work. I would save the big rehab till the day that I sold it. And I would just come in and put flooring, painting, make sure all the appliances worked, make, make it again rent ready. So it would be just $10,000. You would have to put a $70,000 down payment, and cash flow on this is about $1,300 a month cash flow, $15,600 a year. And so to Evaluate whether it's a good rental or a good flip. I have to like look at the numbers. So if I can make $75,000 in 2 months, for me to cash flow $15,600 a year, it would take me 5— about 5 years, a little bit less than 5 years to pay back or to make this $75,000. So now your decision is, do you want to make $75,000 in 2 months, put it in your pocket? and go buy another flip, or would you want to come over here, start renting it out, cash flow with the property, but knowing that to pay this profit that you would have made already, it would take you 5 years to do that? What strategy excites you the most, flip or hold? Comment below. Okay, and there's a lot more that goes on to the rental. You know, there is appreciation because it is your property, and hopefully you buy it at the right time and it does appreciate. So there's a lot more things to look at in the rental side, but I usually just like to look at what I can make immediately versus how long it's going to take me to make that. And I choose to flip in California for this reason. It's obvious with real estate investment analysis, you'll have all the tools that you need to make the right decision. And with a little practice you'll have this down in no time. If you're ready to get started with your real estate career and get a hold of your financial future, please make sure to subscribe or reach out to me anytime.