The 10-Minute Offer: How to Analyze an Apartment Building Deal and Make an Offer in 10 Minutes
In this section I’ll cover key financial concepts like cap rate, cash-on-cash return, average annual return, debt coverage ratio and other indicators that are critical to understand if you’re going to analyze deals. To learn these concepts, we’ll create a spreadsheet from scratch to begin analyzing our 54-unit apartment building deal.
Then, in the next two videos, we’ll get deep into how to analyze apartment buildings from A-Z in 30 minutes or less.
Let’s get started with the first lesson.
To download the marketing package for the 54-unit in the video as well as the spreadsheet we built, click here.
We covered these financial concepts:
- Cap Rate
- Cash on Cash Return
- Debt Service Coverage Ratio and
- Average Annual Return
By building our own spreadsheet, we were able to do some light analysis on a deal. We were able to validate that the math in the marketing package was correct. Sometimes they’re not, and you can use this to your advantage.
Now that we’re on the same page with regards to the key financial concepts, it’s time to put them to use to analyze this deal. We want to answer the question “what is the most I can pay for this deal” and do so within 10 minutes or less.
We also want to determine how we’re going to structure the deal with our investors, what their returns would be and how much we could pay ourselves.
Also, because the rents are a bit lower than the market, we want to be able to model our business plan and see how that will affect the returns.
And we want to know what the most profitable way to exit is: should we sell in year 5? Or refinance after we’ve stabilized the property and then hold another 7 years? What produces the best returns?
That’s what we’re going to learn in the next video in the series.
So look out for that email in the next 4 days.
In the meantime, let me hear from you below.
What are Your Top 2 “Burning” Questions about investing in apartment buildings?
Leave your two questions in the discussion box below!