The 10 Second Analysis for Buy Rent & Hold
How do you know if you have a good deal? Before I do any deep financial analysis and, definitely, before I go look at a property, I do a simple calculation that gives me a good idea of whether or not I should go any further with the property. Sure, I know all about Gross Rent Multiplier (GRM) and Cap Rate but I find those financial indicators can be overkill for my short term analysis.
I simply compare the monthly rents to the cost of the property. If the property is listed at $100,000 and the rents are listed at $1,000 or more a month, then I am interested. These rents must not include utilities or other expenses that are not normally part of the rent. For example, I have one property that is a duplex. The property is currently valued at $125,000. If the total rents were $1,200 or more, then I would look at it. I actually receive $1,600 a month rental income so it’s definitely a good deal.
The other problem with the financial indicators, is that they are sometimes exaggerated. One Realtor I get investment opportunities from never includes any management expenses so I can never believe his Cap Rate. The other lesson, is “always do your own calculations to determine the GRM, Cap Rate, ROI, etc.”
Happy Investing,
Jim Pellerin
Investor, Advisor, Speaker, Coach, Writer
Register at http://www.RiseBootCamp.com
Get my book at http://www.TheRealestateInvestingBook.com
Good Information at http://www.realtyinvestmentseminars.com
© 2009, JimPellerin. All rights reserved.
