Cash Flow Deal Review

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Are you struggling to figure out if a property is a deal or not?

You can’t figure out the numbers with certainty to feel confident submitting an offer?

Do you feel like you are stuck and not sure how to invest wisely?

We are opening the vault and sharing the precise analysis from the Proven Profit Formula Coaching Program that I teach mastermind clients. It’s my quick and easy formula to determine if a property is a deal or no deal.

In this training we analyze a variety of investment properties. You will learn…

• The difference between good deals versus bad deals
• Where to get all the numbers
• How to put it all together using our proprietary “Cash Flow Analysis” Spreadsheet

Also, during the Cash Flow Deal Review we will discuss:

• Quick and Easy Formula
• Multi-Family
• Value-Add
• Single Family Rentals

 

Ways to Measure a Real Estate Deal

 

1. Cash Flow = Rental Income – Mortgage Payment – Expenses

Cash Flow is how much money is left over after all expenses are paid. The formula is your monthly rental income minus monthly mortgage and minus expenses. What is a good cash flow on a property.  That all depends.

Some investors look for $100 or more per unit per month.  Others are looking $300 or more, but most use cash flow and other metrics to determine a good deal or not.

It really depends on how much you have invested.  We always recommend buying properties that do cash flow, though.  Negative cash flow properties are a huge risk.

2.  Cash on Cash =  Yearly Cash Flow/Cash Invested

To calculate cash on cash return, take your yearly cash flow and divide it by the amount of money you have invested. This will give you a percentage.

Cash on cash of 10% is typically considered a good investment. Yet, again it depends on your comfort level and the location of the property.

Most investors use cash on cash return along with monthly cash flow to figure out how much to offer on a property.

If the property has good cash flow and a good cash on cash return, they will buy it.

3. Cap Rate = Net Operating Income/Purchase Price 

Cap rate is the net operating income divided by the purchase price.  Net operating income is the income you get from your property minus all your expenses except your mortgage payment.

This metric is used more frequently when buying a commercial property.

Good cap rates are in the 5-7% range.  Properties with higher cap rates tend to have more deferred maintenance. So a higher cap rate isn’t always better.

4. Return on Investment = Profit (w/o appreciation)/Cash Invested

Total profits divided by cash invested equals your ROI.  Your total profits are cash flow + principal reduction + taxes saved. You can look at this on a yearly basis or you can calculate it out over several years.

Again, anything over 10% is typically good.  The higher the better here.

5. Return on Investment (Including Appreciation) = Profit (w/appreciation)/Cash Invested

This is your total ROI which includes the estimated appreciation of the property.  For long term investments, this is a good gauge as to what your total ROI will be on an buy and hold rental property.

Wealth is created in Real Estate because there are a number of ways to profit off of a property.

• Cash Flow
• Principal Reduction
• Tax Savings
• Appreciation

If you buy a property at the right price, then you can see huge returns from all of this combined. Numbers as big as 30% or more.  That beats the stock market any day.

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