When pursuing my recent acquisition, I met with several lenders who were interested in funding my deal. To each lender I gave a “Investment Property Calculator” spreadsheet which included detailed information about the home. One of those lenders told me,
“Brandon, if more people put together an analysis like this – they would find themselves with more funding than they would know what to do with.”
This statement, besides being the inspiration for this post, was great confirmation that my obsessive nature of creating a high-quality Investment Property Calculator for my lenders was not a waste of time. Below, I’ll show you how you can get my exact property analysis to use on your own deal-making.
<h2>The Investment Property Calculator</h2>
Despite what the Guru’s say – attracting hard money is not “based on the property.” Hard money, while secured by the property being purchased, is not generally awarded because of the property. In reality, hard money is almost entirely based on YOU. No, not necessarily the contents of your bank account or the experience you’ve had but your personality and professionalism. There are a lot of good deals out there but very few good deal-makers. If you want to achieve success in attracting funding outside the confines of a banking institution, it is important that you brush up on your presentation skills.
Just as the condition of a property on the outside is a huge indicator of the condition on the inside, the presentation that you give a lender is a major indicator of how you will approach your business and care for their money. When I approach a lender with a loan request, I always include my Property Analysis Packet. If emailed, I will make a nice PDF document and email them the information. If given in-person, I will always purchase a professional binder (a nice one, the kind with the clear cover from an office supply store) filled with every aspect of the deal put plainly and neatly on paper.
- A one-page Project Summary, that details the “big picture” of what I’m planning on doing. This includes a photo of the front of the house and a brief outline of some of the features of the home. This page also includes a brief description of the current condition, repairs needed, how much funding I need, my timeline for completing repairs, and my multiple exit-strategies.
- A detailed financial Investment Property Calculator that shows, on one page, all the major pertinent numbers such as purchase price, closing costs, repair costs, holding costs, future sale price and my return-on-investment (at various price points). This shows the lender that I fully understand what makes this project a great deal. It is also easy to follow so the lender doesn’t get lost in the math.
To do this, I have a calculator in Excel that I simply change a few key pieces of information and all the numbers are re-calculated for me. This took many, many hours to perfect over the past several years but now that I have it – it takes just a few seconds to compute all the numbers needed to decide if a deal is worth pursuing.
It is imperative that your figures be conservative. No, not in the Glenn Beck style of conservativeness but in the “I don’t want to under-estimate anything” style. Your lender is going to have a pretty good idea of what it costs to repair and hold a property. By being conservative in your estimates you show the lender that you are experienced, reasonable, and not simply running on emotion.
- Detailed Repair List: This is where I explain the cost of every aspect of the remodel. Under-estimating prices is the biggest danger when flipping a property, so a detailed repair list is not only helpful for the lender but also necessary for your own survival. This list can not be “too detailed.” Include everything, including an amount set aside for overages.
- Comparable Sales: Print out three to five listings (check Zillow.com or ask your Real Estate Agent) of similar properties that have SOLD in the past six months. You probably know your market significantly better than your lender, so by including these numbers you can give confidence to your lender about the future value of your property.
- Personal Credit Report – While hard money lenders generally do not require a credit report, offering them a copy of your own is a great way to build confidence. By showing your report to them you are proving that you have nothing to hide or be ashamed of. This will put you miles ahead of other investors in the eyes of your lender. If you want to get your credit report for free – including your credit score – without signing up for one of those spammy sites you see on the commercials check out CreditKarma.com.
It probably goes without saying (but I’ll say it anyways) that you still need to ensure your prospective property is a killer deal. The best presentation in the world still probably won’t convince a hard money lender to fund you. However, if your deal is solid and you can create a professional presentation of your plan – your chance of successful funding and wealth creation will explode. This is no area to be skimpy on or be sloppy. Presentation is everything.
If you are interested in downloading my exact analysis that I use for every property I pursue, click here or on the cheesy “buy now” button at the bottom. It’s only $19 (via Paypal).
No, you don’t need to buy it; I won’t be offended. You already have everything you need to make it right on your own computer using Excel, OpenOffice, or Google Docs.
However, if you want to save the hassle and help fund the running of this website, download it here!
Included in the download is:
- One Page Project Summary
- Investment Calculator
- Investment Calculator Tutorial
The repair list, comps, and personal credit report you will need to generate yourself. Then, get yourself a binder like this one and put it all together.
Again, if you want to download this stuff for $19, click the big cheesy “buy now” button below. The files are in a ZIP format, so you’ll need to “unzip” them in order to open the folder.
You’ll be taken to PayPal and then immediately after submitting payment you’ll receive an email giving you the download link. If you have any issues or questions, just shoot me an email.