How to do a full property analysis for a sample deal. Using GRM to select a property and then using a full analysis to evaluate a property.

1. VIDEO 1.3-
A Full Blown Analysis-

2. VIDEO 1.3-
A Full Blown Analysis-

3. In todays video I am going
to show you the actual
process I use to search for
properties and to analyze
only the right properties.

4. First …
Let’s do a quick recap

5. In Video 1 …

6. We looked at what
a lot of people are doing

7. I told you that driving for dollars
and looking at properties that
don’t work financially doesn’t
make sense

8. ... do a lot of driving around

9. We looked at how some
people do a financial
analysis of a deal

10. Original Analysis Better Analysis
Item % Capital Operations Profit
Purchase Price $300,000
Down Payment 20% $60,000
Mortgage $240,000
Closing Costs 2% $6,000
Total Investment $66,000
Annual Rents ($1,700) $20,400
Annual Expenses
Mortgage Payment (1,200) 3.5% $14,400
Taxes $3,000
Insurance $600
Maintenance 5% $1,080
Net Income $1,320
Return on Investment 2%
Principal Pay down - yr1 $6,000
Appreciation – yr1 3% $9,000
Total Equity – yr1 $15,000
Total Profit $16,320
Total Return 24.7%
Item % Capital Operations Profit
Purchase Price $300,000
Down Payment 20% $60,000
Mortgage $240,000
Closing Costs 2% $6,000
Total Investment $66,000
Annual Rents ($1,700) $20,400
Annual Expenses
Mortgage Payment (1,200) 3.5% $14,400
Taxes $3,000
Insurance $600
Maintenance 5% $1,080
Management 5% $1,080
Vacancy 5% $1,080
Net Income (loss) -$840
Return on Investment (loss) -1.2%
Principal Pay down - yr1 $6,000
Appreciation – yr1 3% $9,000
Total Equity – yr1 $15,000
Total Profit $14,160
Total Return 21.4%

11. Then … in
Video 2

12. The secret to fast analysis is …
Gross Rent Multiplier (GRM)

13. The lower the GRM
the better

14. Rent is $2,500 per month
Asking Price is $300,000
$300,000 / $30,000 (per year)
GRM=10
Will cash flow with 20% down
$2,500 - $1,770 = $730

15. CAP Rate =
Net Income / Price

16. CAP Rate
is very subjective

17. Then we talked about
Cash Flow and
Cash on Cash Return

18. Investment = $60,000
Profit = $200 x 12 = $2,400
Cash on cash return =
$2,400 / $60,000 = 4%

19. Today I want to put
together everything and
show the complete
process

24. Rents = $4,250 x 12 = $51,000
GRM = $960,000 / $51,000 = 18.8

25. Some motivation

26. Rents = $1,800 x 12 = $21,600
GRM = $399,000 / $21,600 = 18.5

27. Rents = $1,000 x 12 = $12,000
GRM = $130,900 / $12,000 = 10.9

28. Rents = $3,095 x 12 = $37,140
GRM = $579,000 / $37,140 = 15.5

31. Rents = $2,325 x 12 = $27,900
GRM = $478,900 / $27,900 = 17.16

32. Rents = $2,140 x 12 = $25,680
GRM = $429,000 / $25,680 = 16.7

33. Rents = $2,600 x 12 = $31,200
GRM = $390,000 / $31,200 = 12.5

34. Rents = $3,050 x 12 = $36,600
GRM = $449,900 / $36,600 = 12.3

36. Rents = $2,345 x 12 = $28,140
GRM = $269,850 / $28,140 = 9.5

37. Rents = $1,501 x 12 = $18,012
GRM = $154,900 / $18,012 = 8.6

38. Location List Price Monthly Rent Yearly Rent GRM Activity
Ottawa, Brewer Park $960,000 $4,250 $51,000 18.8 No
Ottawa, Lincoln Field $399,000 $1,800 $21,600 18.5 No
Alexandria $130,900 $1,000 $12,000 10.9 Maybe
Ottawa, Bronson $579,000 $3,095 $37,140 15.5 No
Speed Analysis Using GRM
Ottawa, Carlingwood $478,900 $2,325 $27,900 17.16 No
Bourget $429,000 $2,140 $25,680 16.7 No
Ottawa, Orleans $390,000 $2,600 $31,200 12.5 Maybe
Ottawa, Vanier $449,900 $3,050 $36,600 12.3 Maybe
Prescott $269,850 $2,345 $28,140 9.5 Maybe
Cardinal $154,900 $1,501 $18,012 8.6 Maybe
May be an opportunity to joint venture with the owners.

39. Next I do a deeper analysis
on the properties …
where the
financials make sense.

40. Rents = $2,600 x 12 = $31,200
GRM = $390,000 / $31,200 = 12.5

42. Property Address MLS# n/a
Agent: Number of doors 2
Purchase Price 390,000.00$ Property Taxes 3,900.00$ Gross Rental Income 31,200.00$ $2,600
Market Value 390,000.00$ 100.0% Insurance 1,170.00$ Other Income (e.g. Laundry) -$
Repair Costs (Rebate) -$ Water/Sew er 720.00$ Total Gross Income 31,200.00$
Dow n Payment 78,000.00$ 20.0% Garbage -$ Vacancy Allow ance 1,560.00$ 5.0%
Closing Costs 4,775.00$ Electricity -$ Effective Gross Income 29,640.00$
Cash Required at Closing $82,775.00 Licenses -$
Advertising -$
Supplies -$ 1st Mortgage 17,710.20$
Maintenance 1,482.00$ 5.0% 2nd Mortgage -$
Law n 400.00$ 3rd Mortgage -$
1st Mortgage Amount 312,000.00$ 80.0% Snow Removal 500.00$ Total Debt Service 17,710.20$
Interest Rate 3.00 Pest Control -$
Amortization (Years) 25 Management - Off Site 1,482.00$ 5.0%
Payments per year 12 Management - On Site -$ 0.0% Net Operating Income 19,736.00$
Monthly payment 1,475.85$ Accounting/Legal 250.00$ Total Debt Service 17,710.20$
2nd Mortgage Amount -$ 0.0% Miscellaneous -$ Yearly cash flow 2,025.80$
Interest Rate 8.00 Gas -$ Monthly cash flow 168.82$
Period 25 Telephone -$
Frequency 12 Pool -$
Periodically -$ Elevator -$ Appraisal, Inspection 750.00$
3rd Mortgage Amount -$ 0.0% Pest Control -$ Legal 1,000.00$
Interest Rate 12.00 Budget for Replacements -$ Mortgage Broker - 0.00%
Period 25 Other -$ Land transfer 4,325.00$ 1.11%
Frequency 12 Other -$ Rent Deposit Pro Rated (1,300.00)$ 50%
Periodically -$ Other -$ Rebate -
Total Monthly Amount 1,475.85$ Total Yearly Expenses 9,904.00$ 31.7% TOTAL 4,775.00$
Orleans
Ow ner
Closing Costs
Cash Flow Summary
Purchase Details Yearly Expenses Yearly Income
Monthly Mortgage Payments
Yearly Debt Service

43. RATIOS Formula Calc Objective Year Profit Rate
GRM Price/Rent 12.50 less than 12
CAP Rate NOI/Price 5.06% greater than 10%
ROI1 - Cash on Cash Return Profit/Cash 2% > 10% 2,025.80$
ROI2 add Principle pay down(PPD) ROI1+PPD 13% After 1 Year > 8,524.02$
ROI3 add % Growth ROI2+Growth 27% After 1 Year > 11,700.00$ 3.0%
22,249.82$
Avg Profit/door/mth Proift/Door 84.41$ >$75
Coverage Ratio NOI/Debt 1.11 1.2 to 1.5
Cost / Unit Cost/Unit 195,000$ < $175K
Year 1 Total Return

44. That concludes Video 3, the
last video in our mini series.
See you at the Webinar.