00:00today we're diving into a crucial topic
00:02for newb Real Estate Investors and that
00:05is how to analyze a potential real
00:07estate investment specifically focusing
00:10on a single family rental
00:18home before jumping into any investment
00:21it's vital to conduct a thorough
00:23analysis to ensure you're making a wise
00:26financial decision so first you're going
00:28to want to identify your investment
00:31goals what are you trying to achieve are
00:33you looking to invest in a long-term
00:35rental property a short-term rental is
00:37the property going to be a quick flip
00:40for this video we will analyze a
00:42property with the intent of being a
00:43long-term rental property second you're
00:46going to want to research the local
00:48market trends analyze the neighborhood's
00:50growth potential property values rental
00:52demand and any upcoming development or
00:55infrastructure changes where the
00:57property is located we will be looking
00:59at this single family home in Savannah
01:02Georgia when analyzing the property
01:04you're going to want to evaluate the
01:06property specifics now let's zoom into
01:08the property itself we want to assess
01:10the condition of the single family home
01:12including its structural Integrity the
01:15age repairs needed if any and uh
01:18potential Renovations that may need to
01:20be completed if you are not purchasing a
01:22turnkey property once you found what
01:24you're looking for you're going to want
01:26to Crunch the numbers now it's time to
01:28get into the nitty gritty you're going
01:30to want to calculate the potential
01:32return on investment by factoring
01:34expenses such as property taxes
01:36Insurance maintenance cost and estimate
01:39the monthly rental income to determine
01:41if this is a viable investment we will
01:43be using Bigger Pockets rental property
01:46calculator now this property here is
01:49listed for 389,000 it is in Savannah
01:52Georgia ZIP code 31419 it's a
01:54four-bedroom two bath 2300 ft uh single
01:58family home now for some Simplicity sake
02:00we'll be putting 20% down on this
02:03property for this property we will type
02:05in the property address the correct
02:07number of bedrooms bathrooms square
02:09footage uh the property was built in
02:111976 so it is an older home but then
02:14we'll jump into the actual calculation
02:17for this scenario we will expect a
02:19little bit of a discount off the
02:21property price that's listed and we're
02:23going to look at purchasing the property
02:26$380,000 next we'll come across the
02:28purchase closing cost and this is going
02:32$5,700 and typically the closing costs
02:34are 1% of the loan amount next we're
02:37going to go into the loan details and in
02:39this scenario we are going to be putting
02:41down 20% with a current interest rate of
02:457.03% next you'll have the points and
02:47points are a fee or a charge from the
02:50lender which you'll pay to take out the
02:52loan one point is equal to 1% of the
02:55loan amount this will vary by lender but
02:58one origination point typically equals
03:01again 1% of the mortgage loan amount if
03:03you are borrowing say 300,000 and your
03:06lender charge is a 1.5 originating
03:10$4500 to your lender for originating
03:13that loan next we'll come to the loan
03:15terms field here and this is going to be
03:17a standard 30-year loan next we'll move
03:20to the rental income field here we will
03:22estimate the gross monthly rental income
03:25the property will generate also known as
03:27the rental rate they have a Nifty tool
03:29here that pulls the comps for you
03:31however your most accurate rental
03:33analysis will come from a professional
03:35property manager within the area next
03:37you'll have the annual income growth
03:40this is a percentage increase
03:41year-over-year you can expect the rent
03:44to increase for your rental property we
03:46can conservatively estimate that rents
03:48will increase 3% year-over-year some
03:51years it can be much more than that in
03:53other years it may be less than that
03:54next we'll have your property taxes
03:58$3,773 you can pull this information
04:01from the public records found on the
04:03County's property appraiser website
04:05where the home is located or you can ask
04:07your realtor about the current tax bill
04:09and depending on your preferred search
04:11platform they will display it on the
04:13listing as well keep in mind though when
04:15you do purchase a property they will
04:17reassess the property tax bill and your
04:20bill will likely be higher the following
04:22year next we'll have the homeowners
04:23insurance and in this field we will put
04:27$1,634 next we'll want to calculate
04:29repairs and maintenance expenses I like
04:31to use one point times the monthly
04:33rental rate for the year which means if
04:36the property is grossing say $2,000 a
04:39month we times that by 1.5 which equals
04:41$3,000 for the year and is roughly 12%
04:45of the monthly rental rate next we have
04:47the vacancy rate the rate is the cost of
04:50the property sitting empty due to tenant
04:52turnover typically vacancy rates are
04:54between 3% to 10% of the gross monthly
04:57rental rate but again that can vary
04:59depending on the area here we will do 5%
05:02we also have to expect for any major
05:04repairs which are our Capital
05:06expenditures or capex and they are
05:08bigger projects and less than frequent
05:11improvements that will need to be done
05:12to the property such as roof driveway
05:14siding or possibly new appliances
05:16allocating between 5 to 15% is good
05:20however this home looks to be in pretty
05:21good condition even though it is older
05:24it does look well cared for so we'll put
05:263% here lastly we have the management
05:29fee which is typically 8 to 10% of the
05:31monthly rental rate depending on the
05:33area of course but then we have the
05:35electric gas water and sewer and HOA
05:38does if any this one does not however
05:41the tenant will take care of typically
05:42the electric water sewage on their
05:45behalf understanding financing options
05:47is crucial explore and Shop mortgage
05:49rates loan terms and evaluate how
05:52they'll affect the investment's
05:53profitability now let's finish the
05:55analysis and we'll click this here so
05:57this property here actually does not
05:59perform very well um as you can see from
06:02the report generated it has a negative
06:04cash flow so you're going to want to
06:06mitigate risk obviously this property
06:08here does not cash flow and would not be
06:10a good investment however don't overlook
06:13the risk involved altogether consider
06:16the vacancy rate Market fluctuations and
06:18definitely include professional Property
06:20Management Services into your
06:23calculations and having an expert manage
06:25your property is a huge way to mitigate
06:28potential losses and stress and truly
06:30make your property passive income um for
06:32this one you don't have to worry because
06:34it's not a good sound cash flowing
06:36property analyzing a potential real
06:38estate investment property demands
06:40attention to detail in thorough research
06:43remember a well-informed decision can
06:45paay the way for a successful investment
06:47Journey that's all today for this video
06:50if you found this helpful don't forget
06:52to hit the like button subscribe for
06:54more insight to real estate investing
