How to quickly analyse a deal in 3 steps

If you are interested in real estate, then you probably have analysed several deals in your lifetime. At the same time, if you are interested in investing in real estate full-time, you probably analyse deals several times a week. The more deals you analyse, the more deals will start appearing at your doorstep.

When I say analyse, I simply mean run the numbers to see if the property would make sense to buy. There are always houses on the MLS listing, but depending on the market, many of those don’t make sense to be deals at all. A deal is a property that, as you get better at analyzing properties, stands out for being a good investment.

Understand your market

Real estate markets are different in every town or city. Therefore, it’s important that you seek to understand the true market you are looking to invest in. Many people will say things about markets, and sometimes they are true, but sometimes they are not. Seek to understand the truth. In every single market, there is a loop hole for investing. If you think your market has no deals, you are wrong, you just have to find them. In a seller’s market, it usually means the rents are fairly high, so it’s possible for you to charge a little more from tenants. In a buyer’s market, there may not be as many renters, but the home prices are probably lower, therefore you can have a lower mortgage.

Once you understand your market, it will be easy to underwrite several deals in a lot less time. This is essential when it comes to building your portfolio.

Calculate the numbers of several properties

I would suggest perusing the MLS in your town, and find out home prices. Calculate the mortgages, and find out what the amortization looks like. If you Google, mortgage calculator then you will get several choices to try out. Once you try this with several properties, you will begin to see what the home prices are to the mortgage prices, and you can begin to understand your market.

I started out looking for properties to live in myself, and I analysed thousands of houses and their mortgage prices. I typically amortize the loan over 30 years because the payment will be lower. You can try the loan at 15 years, but you are locked in at that time frame. There are several strategies when paying off a loan, but personally I choose the 30 year, and pay down the principal on my own. Which just means, I pay extra money each month, and it reduces your actual house cost, which makes your loan decrease substantially over the course of a few years.

It’s also important to see what the rental market is where you live. Check out the classified ads in the newspaper and see what people are asking for in rentals. Browse the rental section on Facebook- what are people getting for rents? You can ask your realtor what the rental market is doing.

After you run the numbers on several properties, each property gets easier and easier. When a great deal pops up, you will be so good at calculating whether or not the numbers work that you can be one of the first to offer on a deal.

Find a great real estate agent

This probably seems obvious. Ha! To be honest, this was the hardest part for me, because there really are a lot of great real estate agents and brokers out there. The important part is to find someone that gives you exactly what you are looking for. This also takes some very clear instructions on your part, because you need to know what you are looking for. Real estate agents will bring you a lot of things, and if you don’t know what you are looking for, then you will continue to be disappointed over and over again. Narrow down your strategy, and then you can focus on the good deals within that realm.

Having a real estate agent or broker in your corner will be beneficial when you get good at making sure the numbers work on properties. Many brokers and realtors will give you their calculations of the deal and why they brought it to you. Then you can cross reference with your own skills.

What are some of the ways that you analyze real estate deals in your area? What is your market like?