Multifamily Real Estate Investing – Analyzing a Small Deal

Hello Real Estate Investors!

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Today, we are going to analyze a small deal and see how the numbers work out. You will learn the basics of analyzing a deal with my handy-dandy analysis excel tool. Even though we will find that this deal doesn’t work out because it is just too small given the current lending environment and mortgage rates, we will cover how to look at P&Ls, rent rolls, etc.

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Everything you need to quickly look at a deal and see if it will work is what you will walk away with. So, without further or do, here we go!

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First and foremost, we will cover a P&L or profit and loss statement. This is a statement that will show you all revenues, expenses, and then corresponding net income from operations. It is reported over a period of time, and it gives you an overview of the operations of a business. These are essential in determining important factors in our evaluation which are expenses. By looking at a P&L that you get from a seller, usually for the prior year, you can get a sense of what type of income this property does and importantly what the expenses are. From here, you can somewhat gauge if the property is operating correctly or if there might be some deferred maintenance to consider.

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You can expect property expenses to run 35-50% of gross revenue, or gross collect rents. Smaller properties can usually be managed for less at 35% and larger properties closer to the 50% mark. Newer properties are also managed with less expenses because your maintenance isn’t as much as on older properties. Let’s look at a snapshot of an annual P&L to look at, that is a P&L that covers one year of operating from 1/1/2022 to 12/31/2022…

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Read the full blog post here: https://connormccarl.com/analyzing-a-small-deal/

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