Real Estate Analysis

It always helps to know where you stand before you begin a real estate transaction, and that’s where real estate analysis comes in. Just imagine – if you were able to foresee whether a property would be a good investment or a bad one prior to ever spending a dime, wouldn’t you want that information? Absolutely. Analysis is the difference between the savvy real estate investor and the enthusiast, and especially between those who are profitable and those who are not. 

As the majority of real estate investors who purchase property acquire them for the goal of renting, it’s important to understand the difference between a real estate investment and a rental property investment. Many real estate investments such as TIC (tenant-in-common) funds or REITS spread their investor’s pool of money over multiple properties. Thus, it’s more important for investors in those instruments to know the average annual yield of the fund or REIT and their specific investment goals. 

When you’re investing specifically with the goal of rental in mind, there are multiple criteria that must go into the analysis of the real estate in question. It’s not as simple as an annual yield or a fund manager. It’s about all of the financial criteria that will make or break you as a real estate investor.

Here are some key values for real estate investors to make sure they have available or provided to them when considering a property as either a short-term flip or long-term hold for rental income.

• Historical property values for the area/city
• Inventory absorption rates for the area/city
• Historical rental rates for the area
• Recent comps on comparable sold properties
• Cash on hand for downpayment and closing cost requirements
• Estimated annual property tax and insurance costs for the property
• Estimated property management fees for the property
• HOAs (if applicable)
• Monthly rental income versus monthly mortgage costs

If you’re able to gather the above information prior to beginning your real estate analysis, it will prove rather useful. You’ll find that you’re well-equipped to make not only a more sound decision regarding a rental property investment but also better investment decisions from a financial standpoint for your entire real estate portfolio. 

InvestorLoft simplifies the real estate analysis process. To begin analyzing properties and reviewing options for real estate investment such as REO or bank-owned properties, foreclosure listings, multiplexes, single family homes and more, visit InvestorLoft.com. Register for your free account today and receive access to our in-depth tool set for real estate investors. Search for properties by cap rate, cash flow, cash on cash return, down payment and more. Once you’ve found properties of interest, you can use the “View Financials” tool on each property’s detail page to crunch the numbers real-time.

The information contained herein is for educational purposes only and not intended to replace the experience counsel of your real estate professional, attorney, tax professional or other advisor. Before initiating any transaction, InvestorLoft recommends you seek professional guidance and perform the necessary due diligence in order to make the best possible decisions for your specific situation.