Multifamily Legacy Podcast 063: The Six Pillars to Profits: Pillar 3 - Secret to Analyzing Phat Deals
Today, I’m going to share some stories about what I did wrong to prevent you from making the same mistakes. Pillar 3 - Secret to Analyzing Phat Deals is often the point where most new investors fail.
They make bad assumptions and become too aggressive. They over promise themselves and their investors. That’s a recipe for failure, not success. It can get you into a lot of trouble. I know because I have failed time and time again, but I try to not make the same mistakes.
Topics on Today’s Episode:
- Pitfalls of broker packets with an offer memorandum (OM); peel back layers to find accurate information to analyze a deal and make assumptions
- Select software (Kahuna Cashflow Calculator) to underwrite and analyze deals
- Most people speed and drive numbers too fast; they overestimate what they can do - be conservative and learn to say, “No”
- Data and due diligence identify if it’s a deal or not, don’t buy based on emotions; utilize Do Not Exceed bids
- Rules of Thumb to Underwrite Properties on Per-door Basis:
- Raised salaries by $1,285; invest in your people
- Increased online advertising and promotion by $200
- Budgeted $800-900 for upkeep and maintenance
- Office admin bumped up $150
- Get an insurance agent to give you a quote
- Verify utilities by obtaining costs for the past three months
- Underwrite cost of taxes going up due to new purchase price
- CapEx: Determine reserves and make adjustments
- Underwrite with 25% down; amortize at 25 years, not 30
- Never underwrite property with higher than 94% occupancy
- Always underwrite concessions at 3%
- Ultimate Underwiring Goal: Under promise, over deliver
Links and Resources Mentioned:
Quotes:
“They over promise to the people that matter most - that’s your investor, that’s the money. When you do that, it’s a recipe for failure.” Corey Peterson
“Your experience is the sum of two things: All your successes and, I think more importantly, all your failures.” Corey Peterson
“If you look at underwriting and analyzing deals from the right perspective, it will give you a key to be super successful.” Corey Peterson
“When we really, really want something, we try to make it work.” Corey Peterson
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