This spreadsheet can save you hundreds of hours on your first real estate investment
"You have to analyze hundreds of properties before you buy your first investment"... I heard this over and over when I started. I didn't believe them. "That's for people that don't know what I do" I thought.
I was wrong.
Before I bought my first property I did end up analyzing between 75 and 100 properties.
When I started, a single property could take me 30 minutes. Then I had to increase the volume and become more efficient. Rep after rep I learned more and got better. Now I can analyze a property in less than a minute.
What they don't tell you is that you don't have to spend hours analyzing properties. I want to teach you the process that worked for me along with the tools I used.
I hope it helps...
1. Know your criteria
This doesn't have to be rocket science. Pick some criteria and run with it. You can adjust as you go.
I ended up with a target of:
- 3-4 bedrooms
- >1800 sq.ft.
- two neighborhoods in North Tampa
- < $250k (at the time this was the top end price my model would support)
The location is important. Know the neighborhoods and the streets. Drive them.
Once you have the criteria, set up a saved search on Redfin or Zillow. Draw on the map the exact location and set it up to auto alert you on new listings.
2. Work your list
Now that you have your "top of the funnel", you have to work the list.
Set aside a time every day to work through the new listings. I find the mornings are best for me. I tend to procrastinate at the end of the day...
Now run the process.
First, do the math. Open up your analysis sheet (I'll link the one I still use at the end). Enter the price, rehab cost, your estimated value after rehab, and rent. Be conservative.
At this point you need to know your financial minimums. Mine was cash flow of $-100 and a year 10 IRR (Internal Rate of Return) of 15%.
If the property doesn't meet your minimums, make a note and move on. Don't fall in love. If it doesn't pass the math, no amount of emotion can change it.
If you meet the minimums, then it's time for due diligence.
Here's the checklist:
- Make sure your loan values are correct (down payment, interest rate, loan type, closing costs).
- Make sure your rehab costs are realistic.
- Go through expenses and make sure you account for everything. This can take some time to track down sometimes, but is critical.
- Make sure your rent is accurate.
You want to stay conservative on all these. It's better for an upside surprise than a downside one.
Does the math still work?
No? Make a note and move on.
Yes? Let's go through the soft stuff.
Here is my checklist for the neighborhood:
- Open up street view
- Does the neighborhood look good
- Do you see a ton of cars on the street
- Are people out on their property
- Are there any nonresidential buildings near
- Are there any more roadways nearby that would cause noise
Next is schools. Are they rated well? Are they walkable?
3. Get a review
Put all this into a shareable document (something like Google Docs works well). Then find someone to review it.
I had the benefit of having a business partner during this whole process. If you don't then find someone you trust that understands real estate.
Get that person, or your partner, to review the analysis. They should be trying to find problems. You don't want a "yes man" in this process. Where are your blind spots? What are the risks?
Pick the best.
At the end of this process you should have a list of great properties. Now you pick your favorite and start making offers.
Don't expect your early offers to get any interest. It took me 5 offers before I even got a counter.
It takes time, but if you put in the work, you'll come out on top.
4. Leverage the spreadsheet
Here is the spreadsheet we still use to analyze properties. We have variations on this for hotels and short-term rentals, but this has served as a great base.
To get started:
- Open it up and click File -> Make a copy
- Go ahead and enter in your down payment percentage, interest rate, loan type, and term. This way it'll default to this and you won't need to update it every time.
- Update the rent, expenses, and appreciation assumptions in the "Future Returns" sheet. These are the annual growth assumptions and will affect your future returns.
Let us know if you have any questions!