VIDEO 1.3-

A Full Blown Analysis-

VIDEO 1.3-

A Full Blown Analysis-

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.

First …Let’s do a quick recap

In Video 1 …

We looked at what a lot of people are doing

I told you that driving for dollars and looking at

properties that don’t work financially doesn’t make

sense

... do a lot of driving around

We looked at how some people do a financial

analysis of a deal

Original Analysis Better AnalysisItem % 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%

Then … inVideo 2

The secret to fast analysis is …

Gross Rent Multiplier (GRM)

The lower the GRM the better

Rent is $2,500 per monthAsking Price is $300,000$300,000 / $30,000 (per

year)GRM=10

Will cash flow with 20% down

$2,500 - $1,770 = $730

CAP Rate =

Net Income / Price

CAP Rateis very subjective

Then we talked aboutCash Flow and

Cash on Cash Return

Investment = $60,000Profit = $200 x 12 =

$2,400Cash on cash return =$2,400 / $60,000 = 4%

Today I want to put together everything

and show the complete process

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

Some motivation

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

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

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

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

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

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

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

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

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

Location List Price Monthly Rent Yearly Rent GRM ActivityOttawa, Brewer Park $960,000 $4,250 $51,000 18.8 NoOttawa, Lincoln Field $399,000 $1,800 $21,600 18.5 NoAlexandria $130,900 $1,000 $12,000 10.9 MaybeOttawa, Bronson $579,000 $3,095 $37,140 15.5 No

Speed Analysis Using GRM

Ottawa, Carlingwood $478,900 $2,325 $27,900 17.16 NoBourget $429,000 $2,140 $25,680 16.7 NoOttawa, Orleans $390,000 $2,600 $31,200 12.5 MaybeOttawa, Vanier $449,900 $3,050 $36,600 12.3 MaybePrescott $269,850 $2,345 $28,140 9.5 MaybeCardinal $154,900 $1,501 $18,012 8.6 Maybe

May be an opportunity to joint venture with the owners.

Next I do a deeper analysis on the properties …

where the financials make sense.

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

Property Address MLS# n/aAgent: Number of doors 2

Purchase Price 390,000.00$ Property Taxes 3,900.00$ Gross Rental Income 31,200.00$ $2,600Market Value 390,000.00$ 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 f low 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$

OrleansOw ner

Closing Costs

Cash Flow Summary

Purchase Details Yearly Expenses Yearly Income

Monthly Mortgage Payments

Yearly Debt Service

RATIOS Formula Calc Objective Year Profit RateGRM Price/Rent 12.50 less than 12CAP 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$ >$75Coverage Ratio NOI/Debt 1.11 1.2 to 1.5Cost / Unit Cost/Unit 195,000$ < $175K

Year 1 Total Return

That concludes Video 3, the last video in our mini series.

See you at the Webinar.