Buying Rental Property THE RIGHT WAY when analyzing deals and running numbers! In this video, we’re going to talk about how to properly break down the numbers when buying rental property. In the recent years, I have gone to several real estate investing seminars (spoke at a few too), real estate investing meetups, and just about any kind of gathering geared towards buying rental property. But one of the things that really makes me scratch my head when attending these seminars/meetups, is the way people break down deals when buying rental property 😲. BUT FEAR NOT, I am here today to show you the PROVEN way to analyze deals when buying rental property!!!!!
I do NOT trust a profit and loss statement when buying rental property. And on top of that, I also do NOT trust an offering memorandum provided by brokers/agents/sellers when buying rental property, it may look good, but it’s just highlighting the GOOD stuff and NOT every detail you need to know! So instead of a profit and loss statement/offering memorandum these 3 things is what you will use when buying rental property: 1. Rent Roll: This is a snapshot of current income as represented by the owner of the rental property. Rent roll shows the ACTUAL numbers that the rental property makes in a month. 2. T12 Report: Summarizes the property’s economic performance as defined by the net operating income over the past year. 3. Schedule E/Form 8825: IRS Tax forms used to report income or loss from an investment property. These are the documents that I ask for when looking at buying rental property because it provides HOW the property is actually performing, not just what the seller/agent tells you! So how do we verify that these documents are accurate and up to date when looking at buying rental property? ASK QUESTIONS! For instance, if I look at a Schedule E and see a $15k expense for maintenance, I’ll ask about it, ask the seller to provide pictures or invoices to verify the work! The more I know NOW, the LESS I’ll have to deal with later when buying rental property. The second thing I like to do to verify these documents when buying rental property is to verify through public records online. TAXES will be shown in public record & very important when buying rental property!