Your first Real Estate Deal Criteria?
Below are the deal criteria for real estate.
- Property has to be 16 units minimum, Preferably 32 units or more.
- Love the properties Location when you first visit it
- Cap rate minimum after renovations of 4-6%
- You have at least 25% down for your deposit on the loan
- Property has an active manager
- Have a 1.25% debt coverage Ratio
- Set aside $300-$500 for renovations on each unit
- Have an actual insurance quote
- Assume property taxes will increase at the full rate
- Use 40% or more expense calculation
- Assume no increase in effective gross income
- Have all obvious repair cost for the next 36 months in reserve
- Know the break even occupancy (worst Case Scenario)
- Know the financial statement buy heart
- Use a broker on the deal
- Walk and create folders on at least 25 deals before you buy the first one
- Make sure it produces at least $24,000 a year regardless of cash on cash percentage
- Have a minimal 25/50/75% rent increase potential
- Create a solid exit plan for the property
- Do an 8% exit calculation
- Have loan underwriting done by 3rd party without your influence of opinion on the deal
- Use worst case scenario on income
- Know the expenses per door on the property including taxes
- Underwrite your deal assuming all debt, including promises to partners, and principal and interest when calculating cash flow
- Assume 2 years of break even and no cash flow
- Buy the Deal if it passes all of the above