Skip to content Skip to sidebar Skip to footer

How to Analyze Real Estate Deals

Analyzing deals correctly is the key in becoming a successful real estate investor. Learning to analyze deals takes a lot of practice. Even if you are not ready to invest yet, I still suggest you practice analyzing different deals on the market so when the time comes to analyze a deal that you are buying you will be ready. 

About The Property

First, you will want to look at the property itself.

  • What year was it built?
  • How many bedrooms and baths and is there an opportunity to add more?
  • What is the price? Could you possibly get the property for less? Has it been on the market for a while?
  • What is the property zoned for? 
  • What condition is the property in? 
  • Are there any major issues with the property? 
  • Can you add value to the property? If so, what would the estimated price of the property be after the improvements?
Look at all of these different aspects. Understand the pros and cons of each point to help you understand if the property itself makes sense for your situation. 
Type of Loan

Next, you will look at the loan you will need to buy it. If you have a lender you work with, they will answer these questions for you. If you do not have a lender, free websites will give you estimated numbers.

  • What type of loan can you get?
  • What will the mortgage be?
  • What will the Interest rate be?
  • How much are Insurance and taxes if not included in your mortgage? 
If you are buying the property as your primary residence then shoot for an FHA loan first. This type of loan will allow you to put down less money and you will get a great interest rate. 


Next, you will want to look at the income on the property. Sometimes the current income is on the listing and you can use that income for your numbers. If you feel like the property can rent for more or if you are unsure how much the property would rent you can always look on Zillow. Look at similar houses in the same area and use that as a guide for how much you can rent the property for. 

Rental income is not always the only sources of income. Other sources may include: 

  • Washer/dryer income
  • Utility fee
  • Pet fee
  • Garage rent
  • Storage rent

Expenses happen whether you want them or not, and you need to plan for that when analyzing deals. 

Here are some typical expenses you will want to look out for:

  • Will you use a property management company? That will usually be 6-10% of your gross rental income.
  • Will you have a maintenance guy, yard maintenance, snow maintenance, etc? How much will this cost each month?
  • How much will utilities be each month? Are you going to cover these or charge the tenants a fee for them?
  • Lastly, set aside 10% of your income for vacancy, repairs, and capital expenditures.

You want to account for any major repairs, you will need to fix after buying the property.

  • Are there major repairs required?
  • If so, what is required, and approximately how much will it cost?
FInal Numbers

Cash flow

  • You will subtract your total expenses, mortgage, taxes, and insurance from your total monthly income to find your cash flow. (major repairs will be calculated in the Cash on Cash ROI) Positive cash flow is ideal, but if you think the property will cash flow after 1 or 2 years and have the cash reserves, it may still be a good option.

Cap rate

  • To find your cap rate, you will take the total gross income for the year and divide that by the property price. Properties 6-12% are generally good cap rates, and anything higher will be great.

Cash on Cash Return on Investment

  • For the cash-on-cash ROI, you will take your NET yearly income and divide that by the total of your down payment and major repair costs. 12-20% ROI is generally really good. Anything higher is great.

Improvement value

  • If you are making improvements or your goal is to fix and flip, you should look at the property’s value after you are done. What is the estimated new value of the property after renovations? What is your net income after selling? Take your gross income (equity gained in sale and any other rental income earned while owned) and subtract it from your total expenses (expenses, mortgage, insurance, taxes, major repairs, realtor fees, and any other costs).

Leave a comment

Jocelyn Kaufman © 2024 | All Rights Reserved.

This Pop-up Is Included in the Theme
Best Choice for Creatives
Purchase Now
Sign up now, and you will receive an email with the pro-forma attached!
* indicates required
Sign up for my newsletter!
Stay up to date on news and updates.
Jocelyn with notebook
Join my Utah Real Estate Newsletter
Jocelyn with notebook
break free book cover
My new book is available for pre-order right now.
Get your copy for only $1