Do you need help with analysing new property deals? Is this holding you back from buying anything?
I’ve got the solution for you!
I’m a spreadsheet fiend, I get in my zone and then go for it, tabs and tabs, pages and pages of all sorts of numbers.
However, after a long meeting with my business partner, he looked at me and asked ‘is all of this necessary’?
Actually, when you start analysing a property, it’s not necessary to get into so much detail. To start with all you need to know is ‘will this make me a monthly profit?’.
The Only 2 Pieces of Info you need and you don’t even need to call any one…
The key items you need to know for analysing your investment are the value of the property you are buying (capital value) and the estimated or current Rent PCM, all the other items can be estimated unless you know them.
Tip: You can estimate rent by using search websites such as Rightmove, Zoopla or On The Market.
Simple Rent Analysis
‘I don’t think I would buy this is it only made me £36 g
How to work out your expenditure:
Here’s the hack to work out your monthly mortgage re-pay:
If you brought a property for £100,000 and you borrowed £75,000 your repayment at 5.5% (this is the new stress test that banks are going to start using) would be £343.75.
To work this out in excel its (75,000*0.055)/12 to get your monthly repayment
Service Charge, Lettings and Maintenance estimate at 10% of the monthly rent (unless you have actual figures). And if you have a managing agent you need to work this out as an additional 10% of the monthly rent.
Cheaper Alternative Option
Or if you are using the NC Real Estates new course ‘Manage your Property Portfolio in 15 Minutes a Day’ then this will be the equivalent of £16.25 per month for year 1 only!
Finally…
…add up your expenditure and deduct this from your rent PCM.
Gross Profit (Before Tax)
Take a look at the total – is it what you were expecting? Is it too low or are you nicely surprised?
If it’s not what you were expecting i.e. too low, please don’t start fiddling the figures to ‘hope value’. For example ‘I know I expect to achieve a rent of £500 pcm but actually I could, potentially, once in a blue moon achieve £850 pcm’. It’s not realistic, and although you may love the new Gross Profit figure, in all honesty you aren’t likely to get it!
If you love the gross profit figure
If it works for you then go out there and catch yourself a great investment, the figures are there.
Word of Warning
Obviously a you progress through the deal you can update any estimates to more realistic numbers. However, if the deal AT ANY POINT starts to look like it will lose you money, no matter how far along the road you’ve travelled, pull it and go and find something else.
I hope you love how simple this is! Once you’ve got this down to an art you can pad it out as much as you like.
If this has been useful for you then don’t forget to share, like and comment. I always love to hear from you.
NC
