Real Estate Rookie 150: Rookie Reply: Which Rent Numbers Can You Trust When Analyzing a Deal?
Ashley and Tony’s Instagram DMs have been blowing up! This week’s question comes from Collette through Tony’s Instagram direct messages. Collette is asking: Do you make offers based on pro forma or actual rent numbers?
If you’re a real estate rookie or a residential-only investor, this may be the first time you’ve heard the term “pro forma” before. A real estate pro forma is simply a spreadsheet or document that projects the estimated financials on a property once capital expenditures, rent increases, or other improvements have been put in. So, should you trust those numbers?
Here are some suggestions:
Remember to “trust, but verify” and always run your own numbers on projected income
Use multiple different investor scenarios: pro forma, current numbers, worst case, etc.
Take into account the holding cost of performing a large rehab on a commercial property
Calculate your working capital and CapEx budget needed to acquire the property successfully
And more in the episode…
If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).
Links from the Show
Real Estate Rookie Rookie Facebook Group
Real Estate Rookie Youtube Channel
Rookie Podcast 103: From Restaurant Waiter to 100+ Deals in Only 4 Years w/ Derrick Acuff
BiggerPockets Calculator Reports
Check the full show notes here: https://www.biggerpockets.com/rookie150
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