Behind every great real estate investment is one thing: solid analysis. Whether you're buying your first rental or scaling to your tenth property, knowing how to run the numbers (the right way) separates winning deals from costly mistakes.
At LEADRE Real Realty, we guide our clients through this process step-by-step. Today, we’re giving you a peek behind the curtain — so you can learn to analyze a deal like a pro.
Step 1: Know Your Numbers — The Big Three
Every deal begins with three core figures:
- Purchase Price: The amount you'll pay for the property.
- Rehab Costs: Any renovation or repair costs needed to get it rent-ready or marketable.
- After Repair Value (ARV): What the property will be worth after improvements.
Together, these numbers help you evaluate the deal’s true potential, not just its current condition.
Step 2: Run a Cash Flow Analysis
Cash flow is king — and here’s how to calculate it:
Monthly Cash Flow = (Rent) – (Expenses)
Your expenses might include:
- Mortgage payment (principal + interest)
- Property taxes
- Insurance
- Property management fees
- Maintenance/reserves
- Vacancy allowance (typically 5–8%)
A positive cash flow means the property pays you every month. That’s the goal.
Step 3: Know Your ROI Metrics
Here are the key return metrics every serious investor tracks:
-
Cash-on-Cash Return:
Measures how much return you’re earning on the cash you’ve invested.
Formula: (Annual Cash Flow ÷ Total Cash Invested) -
Cap Rate:
Measures property profitability based on income and value (not financing).
Formula: (Net Operating Income ÷ Property Value) -
Gross Rent Multiplier (GRM):
Quick way to screen properties.
Formula: (Property Price ÷ Annual Rent)
At LEADRE, we help you understand and apply these numbers — so you never buy blindly.
Step 4: Evaluate the Location
Even a great deal on paper can turn sour in the wrong neighborhood.
Look for:
- Job growth and population trends
- School ratings and safety
- Proximity to amenities (shopping, public transport, etc.)
- Local rental comps
We use local market data and boots-on-the-ground experience to ensure your property sits in a high-demand, high-potential area.
Step 5: Stress Test the Deal
Ask yourself:
“What happens if rent drops 10%?”
“What if there's a surprise repair?”
“What if interest rates climb?”
At LEADRE, we don’t just chase rosy projections — we stress-test deals to help you stay profitable even when things don’t go as planned.
Final Thought: Good Deals Aren’t Found — They’re Made
The best investors aren’t lucky. They’re informed, prepared, and patient. By mastering deal analysis, you take control of your investing future — and that’s where LEADRE comes in.
We help clients just like you source, evaluate, and secure winning real estate investments that stand the test of time.