Deal analysis is one of the most important skills real estate investors can acquire. One of the worst things that can happen to an investor is to buy a bad deal. It is far better to say ‘No’ to 10 good deals than to say ‘Yes’ to a bad deal.
Of course, at some point, investors have to pull the trigger in order to make money. You can’t just turn down everything that comes your way because you don’t know with absolute certainty whether everything will work. That’s what the investment world calls risk.
Risk can be managed. Investors use all kinds of tactics to manage risks as they work on rehabs or run rental properties. Some examples of risk mitigation include:
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Contingency clauses in contracts (financing, inspection, etc.)
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Third-party inspections and appraisals
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Low loan-to-value investments to make it easy to get your money back
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Milestone payments to contractors
Before an investor puts all those controls in place, they must see if they will receive enough of a return on their investment to take the risks.
Deal analysis will give them a pretty good idea of whether the investment is worth it.
Using Technology to Analyze Deals
Many investors will use Excel spreadsheets (or some other software) to analyze their deals. Others feel fine analyzing deals ‘on the back of a napkin.’ But these methods either take a lot of time (spreadsheet) or are prone to error (napkin).
One thing about good deals. They are not around long. There is a lot of truth to the phrase ‘You can’t steal in slow motion.’ Everyone is looking for that next good deal. If you come across one, you want to move fast to scoop it up.
That’s why it would be great to do your analysis right away – preferably before you go see the property. Or at least while you are inspecting the property.
We’ve found an app that will do just that – it lets you analyze a deal on your phone or tablet while you are on the go. It’s called Deal Check.
Deal Check can take all the information from the property, crunch the numbers, and let you know right away if the deal is worth it. Of course, it’s a garbage in, garbage out app. You need to have accurate numbers for the app to work well.
Once you have the numbers, just enter them into the app. Then Deal Check will instantly tell you the returns you should expect to have.
You can also store the minimum return you will accept to purchase a deal. Deal Check will then let you know right away if the deal meets your criteria or should be rejected. If rejected, you can move on to the next deal and not waste your time.
Just like any deal analysis, there are some basic inputs you must make into Deal Check to perform the analysis. You can see some of the inputs in black in this phone picture.
Once you have entered all the numbers for your deal, Deal Check can quickly give you numbers such as:
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Cap Rate
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Cash-on-Cash Return
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Return on Investment
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Internal Rate of Return
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Rent-to-Value
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Gross Rent Multiplier
And some others…
Don’t know what some of these numbers mean?
Deal Check has a built-in dictionary that will explain them.
Deal Check can provide numbers for both rental property investing and flipping. Right on your phone or tablet.
For the rental properties, Deal Check will also provide yearly projections into the future based on some assumptions of things like appreciation, rental increases, property tax and insurance increases. You specify the percentage you think these numbers will change in the future, and Deal Check crunches them.
Share Your Good Fortune with Others
Making a good deal happen is a team effort. Investors need partners to execute the deal. People like mortgage lenders, investors, and contractors will want to know the numbers on the deal or they won’t want to participate...
Deal Check has a great feature to turn your analyses into a beautiful report you can share with others. All you have to do is upload some photos to add to the report, and provide an address so Deal Check can create a map for your partners.
The reports give you a well laid-out presentation as a PDF. You can see a sample rental property report or a sample flip report on their website. The reports will make a great visual aid to help you explain the merits of your deal to your partners.
Both Apple and Android can support this app. The basic version is free to download. However, free will only allow you to analyze two properties. The ‘Pro’ version will upgrade you to unlimited properties for a one-time fee currently of $8.99.
The Pro version will also unlock some other features including:
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Unlimited photos for your reports (only 1 photo with the free version)
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Itemized worksheets of details such as specific rehab estimates
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Unlimited PDF reports for each of your properties
You can purchase each of these features separately for smaller amounts, but $8.99 for the whole thing seems pretty cheap.
Deal Check is a simple yet powerful app for real estate investors. It will save you a lot of time setting up spreadsheets, crunching numbers manually and creating presentations for your partners. All for a very reasonable price.
What Say You?
If you have experience with this app, share below.
Analyze Your Deals – Do your due diligence. Lack of due diligence is a major reason investors fail.
Look Professional – Nobody wants to partner with someone who is not professional and organized. The quality of your presentation materials says a lot about you.
Move Fast – Good deals don’t tend to stick around very long. Have everything in place before you start looking. Then when you find one, you can jump on it.
JP Moses
is a real estate investor in Memphis, TN, with experience ranging from land lording to note buying, rehabbing, and wholesaling. However, wholesaling is the area that he enjoys most and where he bring the most experience and expertise to his students.