Deal Or No Deal Using Excel Spreadsheets
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Transcript of Deal Or No Deal Using Excel Spreadsheets
Using Excel Spreadsheets
Quickly estimating the value of a rental property
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Presentation Outline
• Review the basics • View some examples• Play with variables• Some handy hints and advice• Questions
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
It is in the numbers!• There are lots of methods and
techniques for evaluating real estate investments– Calculators– Worksheets– Computer programs
• I will show you a simple one page Excel spreadsheet to do it fast and easy
• Focus on 1-4 unit rental buildings – 1st yr
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Why do it?
• If a property does not cash flow then why buy it?
• You need a way to quickly evaluate the hundreds of opportunities available
• Helps you in determining the true value of a rental property
• You can use it to set a sale price or negotiate a better dealDavid Barr, Realtor, GRI, EMS
763-463-7511, [email protected] Keller
Williams Classic Realty NW04/13/2023
Basic information needed• Purchase price• Building income
– rent, laundry, garage, parking, etc.• Financing terms
– Interest rate– Percentage down– Type of loan (fixed rate, ARM)
• Expenses – Tax, utilities, insurance, etc.
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
What it tells you
• If the property will cash flow• Potential purchase price or value• Net Operating Income (NOI)• Return on investment (ROI)• Capitalization rate (CAP rate)• Cash on cash return • All of the above help you make your
decisionDavid Barr, Realtor, GRI, EMS
763-463-7511, [email protected] Keller
Williams Classic Realty NW04/13/2023
It is a new world for RE investors• Bank financing is very tough to get
– Need cash! 20% -30% down (not 0 or 10%)
– Banks require cash reserves (6 months)– Buildings financial history more
important– Pay 1.5% - 3% higher interest rate– Credit scores of 720+ required– Limit of 10 investment properties (up
from 4)– Appraisals must use local & recent
comps
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
It is a new world for RE investors• Property values are down
– Great for Buyers (the perfect storm)– Tragic for many Owners (can’t afford to
sell)• Expenses are rising and won’t go
down– Taxes– Utilities, gas, electric, water
Rents are rising (this is a good thing!)David Barr, Realtor, GRI, EMS
763-463-7511, [email protected] Keller
Williams Classic Realty NW04/13/2023
This is all that matters
• The only way to increase the value of a rental property is to increase the income and or reduce the operating expenses.
• Many sellers forget this and still want too much for a building, even though it looses money for the buyer. Bank won’t loan $.
• A buildings value comes from CASH FLOW
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Which 2 bed duplex do I buy?$189,900 - Robbinsdale
$119,900 – South Mpls
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Example – Robinsdale duplex• $189,900 asking
price• Income $1740/mo• Expenses $4570/yr• Financing
– 20% down– 6.5% interest
• Cash flow $4787/yrDavid Barr, Realtor, GRI, EMS
763-463-7511, [email protected] Keller
Williams Classic Realty NW04/13/2023
Example – South Mpls Duplex
• $119,900 purchase price
• Income $1740/mo• Expenses $10,510/yr• Financing
– 20% down– 6.5% interest
• Cash flow $3094/yr• Cap Rate 8.6%
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
4-Plex with 2 bedroom units
• $450,000 purchase price
• Income $3875/mo• Expenses $13,500/yr• Financing
– 25% down– 6.5% interest
• Cash flow $7401/yr• Cap Rate 7.3
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
4-Plex with 2 bedroom units
• $350,000 purchase price
• Income $3875/mo• Expenses $13,500/yr• Financing
– 25% down– 6.5% interest
• Cash flow $13,089/yr• Cap Rate 9.4
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Play with the variables
• Change the purchase price to fit your goals
• Modify the income & expense numbers to match your plans for the building
• See what a new interest rate or change in loan terms can do to help
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Play with the variables
• Change the purchase price to fit your goals
• Modify the income & expense numbers to match your plans for the building
• See what a new interest rate or change in loan terms can do to help or hurt you David Barr, Realtor, GRI, EMS
763-463-7511, [email protected] Keller
Williams Classic Realty NW04/13/2023
Handy hints for financial success• Buy buildings where the tenants pay
the utilities – this controls a variable cost that only
goes up over time• Buy buildings that have already been
fixed up – Roof, HVAC, plumbing, windows, etc.
• Buy buildings with potential to increase the income– Add bedrooms, laundry, garages, fix up
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Handy hints for financial success• Buy from motivated sellers• Get the lowest interest rate possible• Don’t over leverage yourself• Buy in areas where you can get good
tenants that pay you on time• Minimize your vacancies• Work with local banks for the best
loans David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
What to remember
• Look on paper before driving• Cash flow will get you through any
economy• Buy right• Run a tight ship• Beware of rising interest rates – they
are property value killers• Today is the best time ever to invest in
RE
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023
Thank You for your interest
• I can send you a free copy of this spreadsheet
• I can teach you how to use it, and help you evaluate your rental property
• E-mail me at [email protected]• Or call me at 763-463-7511
David Barr, Realtor, GRI, EMS 763-463-7511,
[email protected] Keller Williams Classic Realty NW04/13/2023