5 Things You Can’t Afford to Get Wrong When Analyzing Deals (Rookie Reply)

Real Estate Rookie

BiggerPockets

How To, Education, Business, Investing, Entrepreneurship

4.8 • 1.7K Ratings

🗓️ 21 March 2025

⏱️ 35 minutes

🔗️ Recording | iTunes | RSS

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Summary

Anyone can analyze a rental property, but if you’re not careful, it’s easy to overlook significant costs that wipe out your cash flow and put you in the red. Thankfully, we’ve got some timely tips that will help you avoid these critical mistakes! Welcome to another Rookie Reply! Ashley and Tony are back with more questions from the BiggerPockets Forums and BiggerPockets Facebook groups. Worried that your “good” real estate deal might not be a good deal after all? We’ll show you some of the things you must account for before you buy! Next, we’ll discuss the ins and outs of real estate partnerships. Whose name should go on the mortgage? How do you ensure that both parties own the property? We have the answers! Finally, how do you make an offer on a property you haven’t seen? What if you receive a low appraisal? We’ll show you how to find “boots on the ground” in any market, renegotiate with the seller, and close on your property for a great price! Looking to invest? Need answers? Ask your question here! In This Episode We Cover: Costs you must account for when analyzing a rental property The biggest pros and cons of turnkey real estate investing How to properly budget for capital expenditures, maintenance, and repairs Why you need a five-year exit plan when structuring a partnership How to find “boots on the ground” when investing out of state Renegotiating with the seller after receiving a low appraisal And So Much More! Links from the Show Ashley's BiggerPockets Profile Tony's BiggerPockets Profile Join BiggerPockets for FREE Real Estate Rookie Facebook Group Real Estate Rookie YouTube Follow Real Estate Rookie on Instagram Ask Your Question for a Future Rookie Reply “Like” Real Estate Rookie on Facebook BiggerPockets Calculators Grab Our Book, “Real Estate Partnerships” Sign Up for the Real Estate Rookie Newsletter Find Investor-Friendly Lenders Real Estate Rookie 326 - The Step-by-Step Guide to Finding the BEST Off-Market Real Estate Deals (00:00) Intro (00:18) Good or Bad Deal? (07:31) Structuring Partnerships (17:32) Making Offers (Out of State!) (28:25) Ask Your Question! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/rookie-538 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Investing out of state can be scary, but we will break down the steps to make your investment a confident one.
0:06.2	We'll also cover what exactly you need to account for when analyzing a deal, along with determining the best partnership for you.
0:17.6	Okay, so we got our first question on Rookie Reply today.
0:21.2	This question is, when looking at the closing disclosure, and you see that rent will only cover the taxes and mortgage if the property management fee is waived for a year, is that worth it?
0:34.0	That would mean that the next year after the property management fee is not waived, then you're
0:39.0	only getting about $50 in cash flow. Would that be worth it in a not so appreciating market?
0:46.2	So here's some things to consider for this question. The person wrote absolutely nothing else
0:52.1	is factored in such as cap X improvements like roofs, HVACs.
0:57.0	Usually we like to save a percentage of that, so that's great that they called that out.
1:01.0	They also noted this is for a turnkey provider who is providing the property management,
1:07.0	who is saying they will waive one entire year for the rental, which could be increased by only a
1:12.8	certain amount due upon the next lease renewal. This is also a single family home in the Midwest.
1:18.9	The rent cannot be increased right away, so I would only receive $50 cash flow after the insurance
1:25.3	taxes and mortgage. This would not include any maintenance. Pretty much the
1:30.0	only reason why it would be anything more than $50 is because the property management fee is waived,
1:35.1	but that's only within the first year. Okay, so to kind of sum up this question is, is it worth it?
1:42.4	Should they purchase this property? Tony, should we start out
1:46.6	with kind of explaining what a turnkey provider is? Yeah, it's a great, great call. So turnkey
1:51.6	providers, and I believe we recently did a reply specifically about turnkey, but turnkey providers
1:56.4	are companies who go out there, they find distress assets, they fix them up, they place
2:02.3	sentence inside of them, and then they sell those fully leased up units to other investors.
2:07.7	Those are called turnkey providers because basically on day one, it's turnkey, you don't
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