If I only had one formula, one analysis metric to tell if a real estate deal is a good deal

or if it's not a good deal, what formula would I use? That's the question I want to tackle

in today's episode of Ask Coach, and we're getting started right now. Welcome to the Ask Coach edition of the podcast. If we haven't met yet, I'm your host, Chad

Carson. You can also call me Coach. And my mission here is to help you get out of the financial

grind so you can do more of what matters. And the Ask Coach podcast series is where I do my best

to answer your burning questions about real estate and personal

finance. Today's question comes from Sean McKay. Many of you might be familiar with him.

He's a past guest on the podcast episode, and he also works with American IRA, who's one of the

sponsors of the show. I'll put a link to American IRA and their self-directed retirement account

information in the show notes. Sean's question came in by email and it says, if you could pick one metric to evaluate a single family rental purchase, what would it be? For example, the 1% rule or a certain equity spread, et cetera. So all of you know I love nerding out on running the numbers and doing deal and house for real estate. So Sean hit me in a weak spot

there. And I'm going to give you a short answer and then I'm going to unpack it a little bit.

My one metric, if I only could use one to buy a single family rental or really any investment

property, is something called an internal rate of return. The abbreviation for that if you're using

a spreadsheet is also the IR. And the reason internal rate of return is my one metric is because it encompasses and also uses

all of the other metrics.

So for example, it takes into account the cash flow you make on a rental property on a

year to year basis.

It takes into account the equity you pay down on the loan.

And if you were to sell a property 10 years from now, it'll use that, that equity you pay down to tell you how that accounts

for the return on the property. And it also takes into account any discount you bought on the

property, any price appreciation. So it takes all of that and it puts it together into one

formula. And that return number number so it gives you a return

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