property analysis

[ressy]

Being new to real estate and trying to acheive my goal of 10 properties in 3 years; I currently have questions that come up.
When analyzing properties i am going through the steps of answering all the questions REIN reccommends. I find at this time when i get the answers i am not sure what to do with the them.
For example: what is a good ratio when looking at the ratio of owner to rentals condo properties?
what vacancy rate is acceptable at a particular condo complex--obviously lower would be better but what is the bottom line?
when reviewing the condo budget--what number is acceptable---if expenses are in the 200,000`s per year
how do you know if the insurance policy is adequate?
these are only some examples that come up that i find i do answer all the REIN worksheets but then end up trying to figure out what actually works and what may not. maybe there is a book that someone could recommend that would help analyze some of these answers.
thank you very much in advance.

 

[thejules]

QUOTE (ressy @ Jan 8 2008, 02:03 PM) Being new to real estate and trying to acheive my goal of 10 properties in 3 years; I currently have questions that come up.
When analyzing properties i am going through the steps of answering all the questions REIN reccommends. I find at this time when i get the answers i am not sure what to do with the them.
For example: what is a good ratio when looking at the ratio of owner to rentals condo properties?
what vacancy rate is acceptable at a particular condo complex--obviously lower would be better but what is the bottom line?
when reviewing the condo budget--what number is acceptable---if expenses are in the 200,000`s per year
how do you know if the insurance policy is adequate?
these are only some examples that come up that i find i do answer all the REIN worksheets but then end up trying to figure out what actually works and what may not. maybe there is a book that someone could recommend that would help analyze some of these answers.
thank you very much in advance.

I look for at least 25% ownership in a condo complex. From my experience the owner occupiers are keeping an eye on things and have a tendancy to want to make them better. Which is good for me as an owner.

As far as vacancy in a complex, I compare the regions vacancy rate to the complex. If they are about the same, I say it`s alright, but if it`s in the complex is 20% vacant but the prices are cheap, I run away.

As far as a budget goes, I check to make sure that they have a healthy reserve fund and that the whole complex is looking good. If the windows and doors look like they need repairs then try to fiquire out what it would cost to replace them all & compare that number to the complex`s reserve fund.

Insurance can be an issue, but I just make sure that they will replace at least to the studs, drywall, roof, doors and windows in case of total loss.

But that`s just my experience. After awhile you`ll instinctively know if you want to invest in the complex.

I hope that helps...

 

[Nir]

You are right Ressy. To resolve the issues and avoid confusion you have to find a way to make decisions efficiently and avoid analysis paralysis.

How about the following: decide about an area you believe in (1st step) and then purchase a property in that area as long as it meets your system (2nd step) - i.e. generates a positive cahsflow with 10% down. You hanlde many variables this way because you focus on the bottom line considering all variables at once rather than spcific vacancy rate, heating cost, rent etc..

Obviously there is a lot of information you will need to collect to do that but looking at it this way simplifies the process for me plus (most important) ensures you actually purchase proeprties not just talk or think about it.

Good luck!

 

[RedlineBrett]

QUOTE (ressy @ Jan 8 2008, 02:03 PM) Being new to real estate and trying to acheive my goal of 10 properties in 3 years; I currently have questions that come up.
When analyzing properties i am going through the steps of answering all the questions REIN reccommends. I find at this time when i get the answers i am not sure what to do with the them.
For example: what is a good ratio when looking at the ratio of owner to rentals condo properties?
what vacancy rate is acceptable at a particular condo complex--obviously lower would be better but what is the bottom line?
when reviewing the condo budget--what number is acceptable---if expenses are in the 200,000`s per year
how do you know if the insurance policy is adequate?
these are only some examples that come up that i find i do answer all the REIN worksheets but then end up trying to figure out what actually works and what may not. maybe there is a book that someone could recommend that would help analyze some of these answers.
thank you very much in advance.

Sounds to me like you should (at least for your first condo or two) pay a few hundred $$ and have the documents professionally reviewed. A good review company will answer all of those questions for you and any others you have pertaining to the management of the condo. If you find a local one they may be quite familiar with the building you are considering and could offer you some nice little nuggets that you would otherwise have no knowledge of!

They will go through the documents with you page by page if you like... and they will show you what to look for. When the next condo property comes around you will be better informed and may not need to pay for a review... But for the first time I think you should consider it!

Best of luck,

BT