How I Analyze a Real Estate Deal in 10 Minutes — The Exact Process I Use Before Every Offer

Every deal I have ever bought I analyzed the exact same way. It does not take hours. It does not take a spreadsheet with 50 formulas.

In this episode I walk you through my exact step by step process — ARV, renovation costs, cash flow formula, and how I make a decision in 10 minutes on any deal.

Real numbers. Real examples. No fluff.

What is your biggest challenge right now when it comes to analyzing a deal? Drop it in the comments on YouTube — I read every single one and will answer.

🎥 Watch on YouTube: https://youtu.be/lHdJtYcmmn8

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🎙️ Listen on Apple Podcasts: https://podcasts.apple.com/us/podcast/from-zero-a-dream/id1836844727

 
CHAPTERS:

00:00 — Every Deal I Analyze the Same Way

00:32 Step 1 — Start With the Purchase Price

00:47 What Is ARV and Why It Matters

01:01 How to Find Comps the Right Way

02:10 The 70 to 75 Percent Rule for Flips

03:05 Why Rentals Are Different

04:26 Step 2 — Renovation Costs

07:55 Always Add a Contingency

08:14 Step 3 — Cash Flow Formula for Rentals

09:11 Real Example With Real Numbers

10:03 The 10 Minute Decision Process

11:19 Build a System Not Emotional Decisions

11:50 What Is Coming Next Week

Transcript

SPEAKER_00 0:00

Every deal I have ever bought I analyzed exactly the same exact way. It does not take hours, it does not take a spreadsheet or 50 formulas. And most beginners overthink this step. They either spend weeks analyzing deals and never pull the trigger or anything, or they do the opposite and skip the analysis completely and get burned. Today I'm gonna walk you through this exact process I use before I make any offer. Every number, every step. By the end of this episode, you will be able to do it yourself on any deal. The first thing I look at is the purchase price. Although that might sound very obvious, so many people skip that and go straight to the renovation price without even considering is that deal worth it or not. So that's the first question I ask myself. I ask, what is the ARV? And if you don't know what ARV stands for, it's after renovation value. What is this property gonna be worth once it's done, once the renovations are complete? And to find that out, I look at comparables or what we say comps in the same neighborhood. And I get very, very exact by the same street or the couple street next to it. I try not to go so far out in the same zip code because you can have two properties in the same zip code, but totally two different comps because that area really bad and that area is well maintained. So the streets do matter every couple streets or every couple blocks. So try stay within the block. And if you don't know what comps mean, I look at recently sold homes in that area, right? And then I take a look at the pictures. Are they renovated and then I see what they go for? So if I if I'm looking at a deal that's a three-bed, two bath, I will look at things that sold three-bed two bath. If I cannot find any, I find the closest one to it. But I try and look at comps and see what these properties will be once they are renovated. What do they go for? And I look at the last three to six months. That's an important part because the market shifts a lot. Not in real estate, not as often like stocks or you know crypto or gold, but they do change, you know. Prices in COVID were a little bit higher, after that they were a little bit lower. So I try to look at the past six months because that's a very good comp what the bank will appraise it for, right? And that number is my ceiling, and then everything else works backwards from there. So, as an example, if the ARV is $200,000, I know immediately before looking at anything else, what is my maximum purchase price for this house. I would never want to be in a deal that my purchase price and renovation price will eat all my profits, or in a lot of cases I see cost me more than what that house is actually will be worth once it's done. And a very simple rule that every investor use is for a flip, because if you're doing it as a rental or a whole, the numbers can be different. But if you're looking to buy this house, fix it up and sell it, which is called a flip, I want to be all in no more than 70 or 75 percent of that ARV price, of that price it would sell for or appraise for. Why rental are different? You can ask that question, because in rental, I personally look at cash flow. If I put a hundred thousand, two hundred thousand, how much are these two hundred thousand bringing me back as a rental versus if I would deploy it somewhere else? So that's why it's different from rental, then a flip. And yes, you can in an ideal world, you can maximize and do both. Get the best of both words. Cash flows, and you still made money because you bought it right. So step number one, ARV must be known before anything else. And if you're asking yourself, how does Omar know all that? Let me give you a little bit of background about me and my team. My name is Omar, and I run a construction business and I own a multiple-digit rentals real estate. I started this journey with nothing, no knowledge about real estate. I've learned from YouTube just like you probably are, and by experience, by doing deals, by doing mistakes. And I shared all these with you so you can avoid these mistakes. As you can see, I'm here in my office, it's under construction, we're still building it, but we got it set up where I could start recording and meeting my team here. This is my company, uh, Mr. Property Remodeling, and I have rentals portfolio in there. And last year alone we did over 50 deals with other investors. And so a lot of these deals I was the contractor on. So I do know renovation prices just like the back of my hand. And if you have not yet done so, make sure you subscribe so you can get notified when I roll out a new video or a new episode. And let's get back into it. Step two, which is the fun one renovation costs. And that's where most investors lose money. So, why do investors lose a lot of money in renovation? I'll tell you, they probably way underestimate what the renovations to get that house to that ARV or that completed phase that looks like like that comp we talked about, or they just get one contractor that bids it and they trust it blindly. I would say both of those number one and two mistakes that investors do and lose money on the renovation. And I have a video on my channel walking the property and sharing how I break it down. So make sure you check that one out. I'll probably put a link for it here so you can make sure you check that one out. It can explain to you what I look at when I visit the property. It's very helpful. For this video, let me give you a quick breakthrough. I walk the property myself or get somebody to walk it for me and send me a good video. And I'll look at everything. I always like to start from the exterior, then I go into interior. On the exterior, I look at roof. Nobody, even if the roof is old, if you want if you're asking top dollar for it, most likely have to change that, right? Because nobody's gonna want to pay top dollar for a 15-year-old's roof. Siding, windows, gutter system, the downspouts, everything. Then inside, I take a look at the layout and the mechanicals. Is this gonna be if it's a two-bedroom right now with enough square square footage? Can we switch it to three or a four-bedroom? And then mechanicals. Will we need to rewire, re-plumb, run HVAC again? And then what kind of finishes need to go there based on the comparables and based on the area? If you're a very nice area in Pittsburgh or houses go high, above 400, 500, 600, some of the million, sometimes all the way up to you know a million dollars. I'm gonna be thinking about it totally different than if I'm in areas where the houses sell for 120 or 150, uh, most, you know, the most you'll get out of it. The finishes will be different as well. Then I build a scope of work, and that scope of work, I add the price to it. Now it doesn't have to be a perfect scope of work, but it can be a realistic scope of work. I break them into categories: demolition, exterior, and interior, including plumbing, electric, age vac, and I do the whole breakdown. And I also don't forget my other expenses. It's not just like you're gonna buy the house, you're gonna fix it, and you're gonna sell it. You have other hidden expenses there that are holding costs. If you're borrowing the money, how much are you paying interest, right? On that money that you're deploying to work for you. That adds in utilities fees, closing costs, um, finder fees, wholesale fees, realtor fees if they got you the deal. All that goes into the deal. So each category of these that we talked about gets a number. I use my experience to walk in and calculate that number for renovation. If you do not have that experience yet, you can reach out to a contractor or reach out to me if you're here in Pittsburgh. I can help you estimate these uh renovation costs, what it will take to get the house ready, and then I add contingency over it. Because even though I'm experienced or any contractor, what if they miss something? It's very common in construction that people miss something, so you should always go into it. If they say $100,000 to fix it, add 10, 15, 20% even as a contingency, and the deal should still make sense. And yes, those deals do exist, so you can add another $10,000, $15,000 there, contingency. They didn't check something. Your contractor is not a home inspector. So if you have the chance, do get yourself a home inspection there, it costs $500,000, $600. But your contractor might not sear the camera, you know, and it's not gonna open the walls, look so well behind them. So it's always good and smart to have contingency there. And in construction, something always comes up. So if my renovation estimate came to $50,000, my budget probably minimum will be $55,000. That's how I protect myself and protect my investments. So now that I calculate my numbers, I'm very easy able to tell if this is a deal or not a deal. Now, if it's a rental, the analysis is a little bit different. I'm not focusing as much on the ARV because I'm not gonna sell it, but I focus on cash flow. How much is this property going to put in my pocket every month from owning it and spending that money on after all my expenses? So here's the formula you could use and I use personally. How much income it's gonna bring a month, minus if you have a mortgage, of course, taxes, insurance, and reserved capital for any repairs you'll have to do. There's always gonna be something, something breaks out in the house. Now, if you renovated everything, it should last longer. But let's say the tenant broke something or the AC just stopped working, you need to send a technician there. So you should always save some money of that rental to go towards these buckets. If the house is newer, you do not have to save as much, you do not have to follow any rules there of how much you can save. Okay, so let me give you a real example. Let's say the property, let's say this deal is rented for $1,500 a month. That's the rental income. You're gonna take that and you're gonna minus out the mortgage. So let's say the mortgage is $800 in this example. So you're gonna take that $800 from the $1,500, and then let's say that the insurance and taxes are $250. So you're gonna take another $250 out. And let's just say you're keeping $100 on a side as a reserve for maintenance. If anything breaks, so you're gonna take another $100 out, you're gonna be left with $350 a month. So you take that $350 and times it by $12 to see how much cash flow a year you will look, and then you have $4,200 from one deal. So that number by itself is not really a life-changing number, but do that by 10, 15, 20 properties, and you can see how that starts building up. Now there's other ways that you can invest to, and remember, you're not really putting your money in because you're borrowing that money to fix up the house. For me, I want to at least see $300 to $400 bare minimum for me to seek that deal from a rental, or otherwise, it's not really worth it for me. Here's how a 10-minute analysis really works in practice. Minute one to two, you check the asking price versus the ARV. Does it even make sense or should you stop and look at another deal? Another couple minutes, you look at the listing photos or the link photos that they share. Condition, the size, any big things you should be aware of. And then here's where your little bit more of work comes is getting a renovation budget. You can estimate from the deals you've done before, have a contractor, you know, go there and send you the numbers. Then finally, you run your flip or your rental numbers like we did in this video, and see if this deal makes sense, should you spend more time on it, or just move on. Now, if the deal passes all this for me, I go see it in person because it had passed all this previous screening. If not, I move on immediately, I will not spend any more time on it. That's how you can look at dozens of deals without wasting any of your time or anybody else's time. So because if there's one thing that really matters in the real estate game is speed. Because people who offer quick and move quick end up with the best deals. But I would rather you move slower and learn so then when you're finally confident to make the right decision, the right call, you get the right deal, then just going fast with skipping any of these steps. And remember, you don't really need a deal, you want a deal. This is the exact process that I use every single day when I'm looking at deals. Precious price against ARV, renovation scope with contingencies, and then the cash flow or profit numbers. It's not really complicated, but most people never build a system or steps like that. They react to every deal emotionally instead of running numbers. But if you build the system, run the numbers, the decision is a lot better because it's based on data, not feelings, or an emotion attachment to a certain outcome. Next week I'm gonna tell you about a deal that almost broke me. Everything that can go wrong on a real estate deal, it happened to me on this one and how it impacted me in the way I invest forever. So if this episode helped you, subscribe and leave a comment below. Tell me what is your biggest challenge right now when it comes to analyzing real estate deals. I read every comment and I will answer all of them. And see you all on the next one.