BOOK A CALL NOW
Want To Become A Successful Real Estate Investor In Today's Economy?

Welcome to Real Estate Residency

I WANT TO GIVE YOU A FREE 30 DAY EXPERIENCE TO LEARN EVERYTHING YOU WISHED THEY TAUGHT YOU IN SCHOOL ABOUT INVESTING IN RENTAL PROPERTIES.

 

Develop a real estate investing approach that aligns with your values, interests, and lifestyle.

WHAT YOU WILL LEARN
This is what you wished you learned 10 years ago and this is exactly what I wished someone showed me 20 years ago.

WHO TO TRUST
Trust is the most important foundation in any relationship. You will gain real-world deal evaluation experience allowing you to make educated decisions on any single family rental investment opportunity AND therefore, investment relationship.

HOW TO BE CONSERVATIVE
Under promise and over deliver. Every time! Picking the right market and correct equation inputs is imperative to your passive income success. You will build consistent comfort and confidence leveraging our proven processes and due diligence checklist.

HOW TO KEEP IT SIMPLE
Remove frustrations, mental blocks, and procrastination when you focus on the top 20% of knowledge and actions that create 80% of your progress.

You can do this and now is the time to take action. This streamlined simple platform allows you to learn how to evaluate any single family rental property in 10 minutes while building an investment strategy that aligns with your lifestyle. We all agree that no one wants to fix toilets and chase down tenants!

Quick Access

NINJA TIP: Increase the video playback speed in the YouTube video setting by clicking on the gear icon in the bottom right of the video. I like to go as fast as my brain can handle!

Welcome to Real Estate Residency

We have broken down the evaluation process for Single Family Residential Rental Properties into two major sections: Investment Objectives and Deal Analysis. I want to walk you through this process and lay it out chronologically to take you from investment objectives all the way to Deal Analysis. And by the time we get to deal analysis, I want you to be comfortable with collecting information, knowing where we should be looking, and what kind of deals we’re looking at. And then when we start typing these numbers into the calculator, it’s super simple and we can do this in ten minutes. So if you look at the picture here, what I’ve done is I’ve pulled this out and this is the same way that I train my acquisition agents for our acquisition company, for our investment companies. 

This is the same way I work with high-net-worth individuals when we acquire assets for them as well too. Most importantly, this is the same way that I’ve built my own passive income portfolio and these are the way that I make decisions and I know that they work and they still work. So let’s jump into this. If you take a look at the picture right in the top center, we’re going to see this little start here thing and we’re going to work around the circle, clockwise. First of all, it’s always the mindset. 

I want to make sure that you get your mindset on the end product first. I want to make sure that your approach aligns with your values, aligns with the time that you’re able to put into these deals, and ultimately the time that you want to put into these deals. I want to show you the basic real estate investing terminology that we use so that we can communicate properly. And you’re going to be able to communicate with lots of other investors in the same way. Too. 

It’s the lingo. I want to show you what markets that you can invest in. How can we look at these markets? Should it be your backyard or should it be somewhere else? I want to show you the simple ways that we calculate our projected rental income as well too, without any special subscriptions. 

I’m going to show you some ninja tips, and some subscriptions that you can have, but you don’t have to have that. Same with the market value, the ARV. I want to show you how our team quickly calculates that and how we’ll follow up with that as well too. To confirm those numbers, I want to show you how we estimate repairs. I’m even going to give you my cheat sheet as well too. 

I want to show you how we stay conservative. I love under-promising and overperforming. And I want to show you how to do that so that you can feel comfortable and confident in every offer that you make. Ultimately, that’s all tied together with a due diligence process. Give you a checklist here to make sure that we’re confirming these numbers that we’re estimating confirming any assumptions that we make and making sure that inside of our offer, inside of that process, is the time that we cross the T’s and dot the I’s. 

So let’s jump into this. Check out the next video in the series. 

Step 1: Establish Your P.I.G.

Establishing Your Passive Income Goal – P.I.G.

P   Passive

I   Income

G   Goal

 

Reverse engineer your perfect scenario that aligns with your “WHY”.

 

Amount: Replace your active income with passive income.

$120,000 / ($200 (cash flow per door) x 12) = 50 doors (units)

 

Timeline: set the final timeline date, divide doors and time by two and work your way back to this year.

10 years = $120,000 annual passive income with 50 doors

5 years  = $60,000 annual passive income with 25 doors

3 years  = $28,800 annual passive income with 12 doors

2 years  = $14,400 annual passive income with 6 doors

1 year    = $2,400 annual passive income with 1 door

Step 2: Understanding the numbers ROI (1% rule)

Align your Values and your Time Investing In Single Family Rental Properties. Make sure you start with your final passive income solution in mind when you begin building your passive income portfolio. Your investment style MUST align with your values and the amount of time you are willing and able to invest; now and ten years from now.


80/20 Investor Self-Assessment 

1. What type of property are you interested in owning? 

2. What type of tenant are you willing to host? 

3. How much time are you able and willing to invest? 

4. Are you able to invest in out-of-state properties? 

5. What is your exit strategy? 

6. Type of Purchase? Debt or No Debt? 

7. What is your strategy to pay off the debt? 

8. What are your standards of quality? 


The THREE C’s:

1. Capital – what is the amount of deployable capital you have to work with?

2. Commitment – how much TIME do you have to commit to learning and doing?

3. Control – how much liquidity our “say” do you need in each deal?

 

Investment Objectives for Physician Wealth Systems Our purpose is to acquire properties that insurance companies want to write policies on, lenders want to utilize as collateral to loan money, and tenants want to rent at or above market rent. 

If we agree on the inputs of our investment equation then we cannot argue the outputs/outcome. This investment strategy is mathematical and not emotional. We are building a Single Family Residential Rental Portfolio based on the following details: 

-Purchase with cash and refinance (BRRRR Strategy) 

-Make minimum payments to maximum cash flow and maintain control of capital 

-No rental assistance programs (revision: we currently have expanded our program to include select rental assistance programs in select markets)

-Class C or better neighborhoods 

-Apply economy of scale in our target markets 

 

Goals 

Ultimately we want to keep the ROI and Monthly Net Income HIGH AS POSSIBLE; the Loan Amount and Actual Cash Invested LOW AS POSSIBLE. Something called Infinite Return occurs when you can borrow (pull more money out) more money than what you have invested in the property – THIS IS GOOD! 

 

CAP RATE: greater than 7% 

Percent of ARV: less than or equal to 92.5% 

Return on Investment ROI: greater than or equal to 12% 

Total Stacked Return on Investment: greater than or equal to 30% 

Monthly Adjusted Net Income (Financed Purchase): greater than or equal to $200.00 

Loan Amount: less than or equal to $130,000.00; less than or equal to 80% of ARV; 

if greater than $130,000 and all other conditions are met, consider the proportionate increase of Monthly Adjusted Net 

Income to determine if the deal makes sense. 

Loan to Value LTV: less than or equal to 80% of ARV 

Actual Cash Invested: less than or equal to $25,000; need an option to see the solution if a larger Actual Cash Invested amount is required (i.e. Cash Invested=$33,000 and all other conditions are met) 

Debt Service Coverage Ratio DSCR: greater than 1.20 

 

Sweat Equity Disclaimer These ROIs are figured for passive investors, investors who are NOT locating the opportunities, managing renovations, and managing the properties. Remember to account for your time! I say we shoot for INFINITE RETURN! 

Every area of our lives has a specific language that allows us to communicate efficiently and effectively. Real Estate Investing is no different. Here are some of the basic terms you must understand to be a successful investor in real estate.

–> Click HERE to download your full copy of the Real Estate Residency Terminology <–

 

Actual Cash Invested:  amount of capital (CASH) deployed or invested.  

 

Example: There is a very interesting situation that occurs when you refinance value-add real estate opportunities. It’s called “air equity”. This is the difference in Appraised Value or ARV and the total amount of capital invested. For example, you purchased a property for $100,000 and you invested $25,000 in the renovation. Now this property has been appraised for $150,000. “Poof” you just made money out of thin air; $25,000 in air equity. The interesting part is that the air equity, “money on paper”, offsets the down payment required reducing your Actual Cash Invested. In this example, you would be required to have a $30,000 down payment at 80% LTV, for the house that appraised for $150,000. Now you can decrease that amount by the equity you “forced” into the property by completing the repairs and it leaves you with $5,000 Actual Cash Invested.

 

Appreciation: increase in the value of an asset over time. Both the Fair Market Value (FMV) and Market Rent have the ability to increase (appreciate) or decrease.  

After Repair Value (“ARV”):  estimated fair market value of the property AFTER repairs have been completed.

Capital:  cash or liquid assets.

 

Capital Expenditures (“CapEx”):  a substantial upgrade, adaptation, or improvement of the property. This significantly increases the value of the property and often involves structural work and licensed contractors. It cannot be deducted as an expense as it will be capitalized and depreciated over longer periods of time. 

 

Capitalization Rate (“Cap Rate”):  most popular method of assessing profitability and return on investment potential assuming the property is purchased CASH and NOT financed. Cap Rate is generally calculated as the ratio between the annual rental income to its current market value. 

 

Example: Cap Rate = Annual Net Operating Income “NOI” / Fair Market Value “FMV”

 

Cash Flow:  cash or capital received AFTER all reasonable operating expenses AND debt services are paid, a.k.a. “mailbox money”.  Conservative Rule: when you are projecting cash flow, you should reduce it by your projected Vacancy Rate and Maintenance Rate.

 

Example: Cash Flow = NOI – Debt Service   →  Adjusted Cash Flow = NOI – Debt Service – Vacancy – Maintenance

 

Comparative Market Analysis (“CMA”):  process used to evaluate the fair market value of a property; the maximum price a “buyer” is willing to pay and the minimum price a “seller” is willing to accept.

 

Deployed Capital:  money, cash, or liquid assets spent thoughtfully and/or effectively. 

 

Depreciation:  a reduction in the value of an asset over time specifically related to normal wear and tear as well as the projected useful life of the asset. The reduction in value (on the books), using the straight-line depreciation method, can be stretched across 27.5 years for residential properties and 39 years for commercial properties. The depreciation is calculated on the building value ONLY and does not include the value of the land.

 

Example: $170,000 Property FMV, $20,000 Land Value, 37% effective tax bracket

Adjusted Gross Income reduction = $150,000 / 27.5 = $5,454.55 per year

Annual Money You Keep & DON’T Pay In Taxes = $5,454.55 x 0.37 = $2,018.18

 

Debt Service:  total cash required to pay back all debt obligations; make monthly PITI payments.

 

Debt Service Coverage Ratio (“DSCR”):  measurement of an assets available cash flow to pay current debt obligations (debt service). 

 

Example: DSCR = Annual Net Operating Income / Total Annual Debt Service

 

Equity:  the difference in value between what is owed (debt) on a property and the fair market value of the property. Conservative Rule: Reduce your projected equity by the cost to liquidate or sell the property (i.e. (FMV x 0.925) – Total Amount of Debt on Property).

 

Example: Equity = Fair Market Value – Total Amount of Debt on Property

 

Fair Market Value (“FMV”):  a.k.a. Market Value, the maximum price a “buyer” is willing to pay and the minimum price a “seller” is willing to accept.

 

Gross Rental Income:  any and ALL payments received as rent including fees for additional amenities (parking, storage, laundry, etc.).

 

Holdback:  specified amounts of money held back or reserved from the gross income to cover loss in future income due to maintenance and vacancy expenses. 

 

Example: 5% Maintenance Holdback, 5% Vacancy Holdback

 

Gross Rent Multiplier (“GRM”): method used to compare rental investment opportunities. 

 

Example: GRM = Purchase Price (incl. ALL closing costs, repairs,etc.)  / Annual Gross Rent

 

Infinite Return:  receiving the benefits of cash flow, depreciation, principal pay down, appreciation, when you no longer have any deployed capital, money invested, in the deal. 

 

Loan Amount:  total amount of money borrowed or mortgaged on the property.

 

Loan to Value (“LTV”):  calculated as the ratio between the Loan Amount and the Fair Market Value or Appraised Value. Lenders use this calculation to assess their risk. 

 

Example: LTV = Loan Amount / Fair Market Value

 

Maintenance Rate:  also known as a holdback expense, is the projected amount or percentage of rental income that will be used to make minor unknown/unanticipated repairs or capital expenditures to the property. 

 

Market Rent:  the projected amount of rent that can be expected for the use of a property, in comparison to comparable properties in the same area. 

 

Monthly Adjusted Net Income:  Monthly Net Operating Income less Debt Service, Maintenance Holdback, and Vacancy Holdback; adjusted monthly cash flow.

 

Net Operating Income (“NOI”): amount of income produced by a rental property (does NOT include Debt Service). 

 

Example: NOI = Gross Rental Income – Operating Expenses 

 

Operating Expenses:  cost of running and maintaining a property including insurance, taxes, legal fees, utilities, landscaping, cleaning, and repairs. 

 

Percent ARV:  ratio used to measure deployed resources; Property Value / (Purchase Price (including closing costs and cost of money) plus Repairs)

 

Example: %ARV = ARV / (Purchase Price + Repairs)

 

PITI:  monthly debt payment that includes Principal payment (mortgage), Interest payment (mortgage), Property Tax payment, and Insurance payment.

 

Principal Paydown:  debt service covered by collection of rent, a.k.a. “thank you tenant”. The amount of principal paid down and converted to equity. 

 

Rent Ratio 1% Rule:  measures the price of the rental property (including closing costs and repairs) against the gross monthly income it will generate. 

 

Example: Rent Ratio = (Gross Monthly Rent / (Purchase Price + Repairs)) x 100

          ($1,500 / ($130,000 + $20,000)) x 100 = 1%

 

Return On Investment (“ROI”):  calculated as the ratio between the value of the investment versus the cost of the investment. 

Example: ROI = (Net Return / Cost of Investment) x 100

 

Rule of 72:  a simple equation used to estimate how long an investment will take to double at a fixed rate of return. Even though this rule only applies to compound interest, it may still be helpful to estimate simple returns as well. 

 

Total Loan Amount:  total amount of money borrowed or total principal amount. 

 

Total Stacked Return on Investment:  sum of all benefits earned by the investor including cash flow, principal paydown, depreciation, and appreciation. 

 

Vacancy Rate:  also known as a holdback expense, is the projected amount or percentage of rental income that will be lost due to unknown/unanticipated vacancies (no renter/tenant = no income).

 

Value-Add or Air-Equity or Forced Equity:  any real estate with significant opportunities to increase fair market value by completing renovations, repairs, or repositioning. 

It’s time to take control of your future, stop trading time for money, turn your brain on to real estate investing and live life by design.

Stackable Returns:

  1. Cash Flow
  2. Principal Paydown
  3. Depreciation
  4. Appreciation

Step 3: Market Analysis (Outside In Approach)

Just because you can buy rental properties anywhere these days, doesn’t mean that you should. Here are some ways that experienced investors analyze housing markets to mitigate their risk and maximize their return on investment. 

Outside-in Approach

  1. Landlord Friendly states with short eviction timelines
  2. MSAs with a population greater than 1,000,000 with steady increase year over year.
  3. High Gross Metro Product with steady increase year over year. Look for major manufacturers, health care providers, tech companies, finance companies, and fortune 500 companies.
  4. Affordability matters!
    a. Housing Affordability Index = Median Home Price / Median Annual    Income (Target markets with HAI less than 6.0 preferred less than 4.0)
    b. Price-to-Rent Ratio =  Annual Median Rent / Median Home Price
    (Target markets with PRR less than 15.0) 
  5. Data Caution! You will find exactly what you are looking for. Don’t rely on data provided by someone else; always verify.
  6. Affordability Caution! You get what you pay for. 
  7. After selecting the city, you need to understand zip codes and neighborhoods. Build your Preferred Zip Code spreadsheet and utilize Google Maps Street View to “walk the neighborhoods”. 
  8. Generate your “Buy Box” or “Buy Window” that identifies what specific types of houses will be the best to find, insure, mortgage, and rent. 
  9. Create your list of “automatic disqualifiers”.

Step 4: Build Your Team

“Give me a firm place to stand and a lever and I can move the Earth.” – Greek Philosopher Archimedes


Market Resources


  1. Real Estate Agent – Invest in the market themselves with an established team

    1. Market consultation

    2. Project Management

    3. Buy and List

    4. Communicate via Slack

    5. Real Estate Agent Questionnaire

These agents are established and experienced for a reason. When you find the right one, they will know how investors like to operate, where to find off-market deals, which contractors to work with, which insurance agents to call, which  property managers to use/or not use,  title companies to contact, and references for lenders. They will have years of experience working with their team of Market Resources as well. It is extremely valuable for you to find an established cohesive team to plug yourself into as a property owner.


  1. Property Manager – full time focus with 40-400 units

    1. Management Fee

    2. Repair process and cost

    3. Placement and Release cost

    4. Eviction Process

    5. Owner Statement and reporting process

    6. Property Management Questionnaire 

  2. General Contractor / Project Manager

    1. Fee Structure

    2. Size of crew and number of crews

    3. Quote process

    4. Critical Doc requirements

    5. Contractor Questionnaire

  3.  Title Company

    1. Investor friendly

    2. Construction escrow

  4. Lender(s)

    1. Loan Term Sheet Request – know what you are looking for (no seasinging, LLC, 30 amort., etc.)

  5. Insurance Provider

    1. Investor friendly

    2. Inspection process

    3. Rent coverage, vacant property policy, local risk factors (i.e. tornado, earthquake, hail, etc.)

    4. Renewal process

  6. Attorney(s)

    1. Entity

    2. Real Estate

  7. Accountant

    1. CPA vs. Bookkeeping

    2. Own real estate themselves

    3. Number of employees

    4. Number of real estate investing clients (what type of real estate investors are they?)

    5. Experience with cost segregation and REP status

    6. Monthly cost vs Annual cost vs Tax filing

  8. Asset Manager

    1. Software

    2. Data analysis

    3. Monthly, Quarterly, Annual

    4. Asset Manager Checklist

Sources

  • www.biggerpockets.com

  • Facebook Groups (CAUTION) – search existing posts

  • MLS or Zillow – call “pocket deal” listings

  • Find the “movers and shakers” – success leaves clues

  • REI Meetup Groups

Step 5: Build Your Buy Box

 

PHYSICIAN WEALTH SYSTEMS MEMPHIS BUY BOX

Market

Max ARV

Min. Beds

Min. Baths

Min. Year Built

Min. Sq. Ft.

Min. Rent

Min. Median Income

Memphis

$275,000

2

1

1940*

900

$900

$30,000

*Exceptions: duplex/triplex/quadplex and multifamily has separate criteria*

AUTOMATIC DISQUALIFIERS

Condos

Adjacent to commercial structures

Prefabricated/manufactured home

Adjacent to school buildings

Commercial/mixed-use home

Located on or adjacent to four (4) lane road

Golf/club membership requirement

Adjacent to high voltage power lines

Within an age-restricted community

Foundation problems / sagging or falling floors

Environmental/Structural hazards

No off-street parking

Pool

Septic / Well (septic is ok in some markets)

Dirt driveway

No fire damage

PROCESS

Please send all deals to deals@physicianwealthsystems.com

Closing timeline : 21-30 days (exceptions possible)

Inspection period: 7-10 days (exceptions possible)

Cash transactions

Prefer Vacant at Close in most markets (exceptions possible)

PREFERRED ZIP CODES

Class C- and above:

38002 – Arlington (A+)

38117 – East Memphis / Laurelwood (A+ to B)

38004 – Atoka (B)

38118 – Airport (B+ to D)

38016 – Cordova (A to B)

38119 – East Memphis (A+ to B-)

38017 – Collierville (A+)

38120 – East Memphis (A+ to A)

38018 – Cordova (A to B)

38122 – Berclair (B- to D+)

38053 – Millington (B to D)

38125 – East Hickory Hill (A+ to B-)

38104 – Midtown (A+ to B-)

38127 – Frayser (C+)

38107 – North Memphis (A to D)

38128 – Raleigh (B+ to C-)

38109 – Whitehaven (A- to C-)

38133 – Bartlett (A+ to B+)

38111 – Univ. of Memphis (Airbnb) (A to D)

38134 – Bartlett (A+ to B-)

38112 – Highland Hts./Hollywood-Jackson(B to D)

38135 – Bartlett (A+ to B-)

38114 – Orange Mound (C+ to F)

38138 – Germantown (A+ to A-)

38115 – Hickory Hill (B+ to C+)

38139 – Germantown (A+ to A-)

38116 – Whitehaven (B+ to C-)

38141 – Hickory Hill (A- to B-)

Step 6: Start Underwriting Opportunities

If you have considered owning rental properties then you have pondered this question many times: “What should I charge for rent?”. Here is the proven process we use to easily find market rents in ANY market.

Remember, if you stay objective and conservative on the purchase you will overperform on the return.

Sources:

1. Property Manager

2. Zillow Rental Manager

3. Rentometer

4. MLS

 

Zillow Rental Income (monthly): use the bottom end of the range you generate from Zillow Rental Manager www.zillow.com/rental-manager/price-my-rental/ or provided to you by your team PM

 

  1. Enter subject property address and “an” email address

  2. Confirm number of bedrooms, number of bathrooms, and parking (all other amenities to be considered when “fine tuning” your analysis)

  3. Confirm location – same neighborhood, schools, and proximity to major roads

  4. Review days listed and number of contacts

  5. Review available pictures for quality and condition

Estimating ARV (After Repair Value) 

 

Knowing how much rent to charge is crucial but it is just as important to know how much your rental is worth if you consider leveraging debt! Here are the strategies we use to generate fair market value of our investment opportunities. This is the SAME method used by appraisers who tell the lenders, or give their “opinion”, how much your property is worth.

 

Remember, if you stay objective and conservative on the purchase you will overperform on the return.

 

Sources:

  1. Real Estate Agent

  2. Zillow

  3. Propstream (enter code PWS1000 for a 20% discount)

  4. County & City Assessor Sites

  5. Finished sqft and bedrooms matter!

 

How to generate an accurate Comparative Market Analysis [CMA] on Zillow

Note: Comparative Market Analysis (“CMA”) is the process used to determine the After Repair Value (“ARV”). MUST have a minimum of THREE to FIVE comparable properties.

 

5 Minute Quick Review To Qualify:

  1. 1 minute to Review (in or out) Zip, Location, Rent, Price (Quick Review Rent Ratio > 0.008 = Gross Monthly Rent / ARV), Google Maps Street View

  2. 1 Minute prep time (open Propstream or Zillow and MAO Calculator)

  3. 3 minutes to Qualify (assume any property condition not included requires $$ in repairs)

  4. Approximately 20% of Properties Reviewed will yield Full Review

 

ZILLOW RECENTLY SOLD CMA

  • General map view – select SOLD

  • HOME TYPE – select subject property type – Houses

  • MORE

    • Square Feet – (from Zillow listing OR pull information from Propstream) no lower range unless you are in a major city; plus or minus approximately 20% of subject property

    • Lot Size – if subject property has 5 plus acres

    • Year Built – (from Zillow listing OR pull information from Propstream) no lower range unless you are in a major city; plus or minus approximately 10 years of subject property or you have a specific year built in your buy box (i.e. 1940)

    • Sold in Last – start with 90 days and increase to 6 months if necessary (must have 3-5 comparable properties sold within the past 6 months to qualify as a potential deal) NOTE – use shorter time periods in volatile markets i.e. one month or two months

    • Confirm SAME area – neighborhood, schools, DO NOT cross major/busy roads. If the subject house is on a busy road, a comparable house needs to be on a busy road.

    • General Adjustments (market sensitive): Busy road 10k, Bedroom/Bathroom 10k-20k, Basement 10k, Garage 10k

    • Was this property sold AS-IS or was it a FLIP? Flips will be recently purchased low and sold high. They will have light gray walls and brownish gray floors. Cabinets will be shaker style (square) and not intricate. Sometimes you will see stickers on the appliances and it doesn’t look like anyone has ever lived in the home. AS-IS will not have been recently sold.

  • Measure your comparative market analysis value against the Zestimate value

 

ZILLOW FOR SALE (DOES NOT COUNT FOR THE 3-5 MANDATORY PROPERTIES)

  • Pending – look for pending properties with 30+ saves in 5 DOM

  • Pending – look for multiple properties with 30-70 saves

  • Pending – look for how many days to go pending

  • For Sale – look for competition, if we list this house for sale on the MLS what other options do buyers have? Is this a conservative price (i.e. if it was listed for sale at this price would it sell fast)? Are there any other options out there that look better than mine?

 

PROPSTREAM

 

  • Enter address into search field and select populated drop down

  • Select property by clicking details

  • Select Comparables & Nearby Listings to search for cash transactions (green pins on map)

  • Confirm square footage and year built to select comparable properties

  • Review pics or google search comparable property address to view the property on Zillow

  • Select FLIP COMPS to see recent flipped properties – confirm beds/baths/sqft; look at purchase price and sale price

  • Select LINKED PROPERTIES to potentially discuss other properties that the seller may consider selling

  • SELECT properties SOLD FOR CASH to quickly calculate Maximum Allowable Offer “MAO” range

What are some of the common mistakes investors make when repairing or upgrading rental properties? Here are the proven processes we use to determine which repairs are needed, wanted, and NOT considered.

 

Remember, if you’re not sure if a certain repair is needed…always include it!

 

Perspective: the goal is to obtain a mortgage to generate cash flow, earn top of market rent to maximize cash flow, and mitigate risk via property insurance. Let’s focus our repairs with this perspective.

 

Comparables – Flip to the ‘hood

-Match the construction quality, finish level, and upgrades to those of the comparable properties that you used to generate your projected Gross Rental Income range

 

Capital Expenditure vs. Cash Flow

-HVAC, roof, windows, siding, etc. replacement will KILL your cash flow and be booked differently than repairs

 

Insurance

-Keep the house and the owner safe and make sure your insurance provider will insure it

-Roof condition, tree limbs overhanging the roof, exterior peeling paint or rotting wood, crack in any patio, walkway or driveway that my cause tripping, overgrown vegetation/moss on exterior of home or roof, clean gutters, windows/doors sealed properly, dogs – some breeds are not allowed with certain carriers, pools must be fenced in.

 

Municipality Regulations

-Egress, handrail, window locks, tempered glass, smoke alarms, fire extinguishers, etc.

Wear and Tear

-NO CARPET, nothing high-tech with excessive moving parts, market standard appliances

 

Tenant enjoyment for maximum rent

 

Ninja Tip: We use these reno cost per sqft as a quick reference point 

  • Touch up $15 per sqft
  • Lived in $30 per sqft
  • Needs lovin’ $45 per sqft
 
 

Download Repair Cheat Sheet Google Sheet

 

Download PDF Repair Cheat Sheet

 

Deal Analyzer


DISCLAIMER: This information is for educational purposes only. All numbers and scenarios shown are hypothetical and do NOT reflect your real world outcomes. We cannot and do not guarantee results. This is not to be considered legal, tax, investment or real estate advice in any way. Your results will vary based on your actions and other variables beyond our control. Please see the appropriate licensed professionals for advice as needed.


There are six major inputs that take us successfully to our goal. Remember, if you stay objective and conservative on the purchase you will overperform on the return. Disclosure: There are no guaranteed returns and you will need to develop investment parameters that align with your risk tolerance and experience. We only utilize loan products with a 30 year amortization to maximize monthly cash flow by minimizing monthly mortgage payments. The six major deal inputs are:


  1. Rental Income (monthly): use the bottom end of the range you generate from Zillow Rental Manager www.zillow.com/rental-manager/price-my-rental/ or provided to you by your team Property Manager

  2. After Repair Value: is the bottom end of the Comparative Market Analysis range you generated or provided to you by your team Real  Estate Agent

  3. Purchase Price: start with the current asking price, IMPORTANT: do NOT hesitate to lower the Purchase Price until the numbers work no for you matter how far off the ask price it is, this is not about feelings, this is about math

  4. Construction Management + Repairs: the spreadsheet automatically includes $1,500 for projects less than or equal to $10,000 and $3,000 for projects greater than $10,000, the sheet also has estimated costs for each line item that automatically sums and is entered into the first tab on the sheet. Don’t edit Repair Cost on the Deal Input tab.

  5. Loan to Value “LTV” %: start with 75%, typically you need to be between 70% and 80% for the deal to pencil out and be certain you do not exceed the max LTV that your lender allows. You should also target Actual Cash Invested that is less than or equal to $25,000.

  6. Mortgage Interest: at the time this was written, we are witnessing the prime interest rate double in 12 months, with that in mind you should always input a conservative interest rate based on the time frame you plan to refinance (i.e. if the renovation requires three months to complete, target your interest rate on a three month projection).


The second tab on the spreadsheet is labeled Deal Analysis and all the amounts excluding Refinance Closing Costs are auto populated and the cells should not be edited. We look at acquisition in two ways: Cash Purchase and Financed Purchase. The cash purchase perspective, on the left hand side of the spreadsheet, gives you the ability to compare this investment opportunity apples to apples with other investments. The ROI is on cash flow ONLY and does not include depreciation or appreciation. We target greater than 7.0% ADJUSTED NET ROI conservatively here but the real plan is to finance this property NOT hold it in cash. Some all cash investors are likely looking for a minimum of 10% NET ROI here. I like to ask our clients “Worst case scenario, could you live with this? Is this performing as good or better than your current investments?” Remember though these are conservative numbers, stable predictable cash flow returns, and do not include the stacked returns. The real upside is when you introduce leverage. One more really cool thing with this strategy is when you create tax free income! You have to really find a great deal to make this happen but it is possible. When you see the ROI go negative because the Actual Cash Invested went negative, you just entered the land of infinite return. This means you are able to pull out more cash than what you have invested in the deal. A true “extra-cash-out” refinance. The additional cash that you pull out when your mortgage exceeds the money you have invested is booked as a debt and not income. This means you do not have to pay taxes on this money. 

There are a few things on this spreadsheet that you will learn to work with over time, like the negative Actual Cash Invested trick, but overall it will get you where you need to be. There are also conditionally formatted cells that turn green for good and red for bad. They can be modified to fit your investment criteria by selecting the cell, then selecting the Format drop down menu and selecting Conditional Formatting. Also, off to the right on the Deal Analysis tab, you will see the stackable returns calculated for you as well. I don’t have the Principal Paydown equation written so just click on the link and manually find the principal paydown for your specific loan.



Do NOT enter data into the cells shown with X. All other assumed data and conditional formatting should be adjusted to your specific deal and investment criteria.


Note: All returns are shown as Year One Stabilized. Depreciation calculated at 37% Tax Bracket and does NOT exclude cost of land. 

Standard Pocket Deal – 12% ROI

  1. Rental Income (monthly): $1,500

  2. After Repair Value: $150,000

  3. Purchase Price: $95,000

  4. Construction Management + Repairs: $36,000

  5. Loan to Value “LTV” %: start with 75%

  6. Mortgage Interest: 6.5%

Memphis 1 – ARV $165k-$185k.  Rent $1,250-$1,350.  Repairs $22,000 Asking $115k.

  1. Rental Income (monthly): $1,495

  2. After Repair Value: $167,000

  3. Purchase Price: $115,000

  4. Construction Management + Repairs: $31,750

  5. Loan to Value “LTV” %: start with 75%

  6. Mortgage Interest: 4.49%

Memphis 2 – ARV $144k-$151k  Rent $1,195-$1,295  Repairs $38,000 Asking $90k

  1. Rental Income (monthly): $1,495

  2. After Repair Value: $167,000

  3. Purchase Price: $85,000

  4. Construction Management + Repairs: $39,750

  5. Loan to Value “LTV” %: start with 75%

  6. Mortgage Interest: 4.49%

 
 

Step 7: Mitigate Risk

How To Be Conservative

 

  • Rent Range – get your rent range from an experienced Property Manager (40-400 units under management), always use the lower number in the range

  • ARV Range – Local Real Estate Agent who owns rentals in that area, always stay at or below the lowest value in the range

  • Comparables – select comparable properties as close as possible to the subject house, use comparables with LESS bedrooms and/or LESS finished sqft

  • Repairs – assume the worst and hope for the best, if there is no information provided then assume it will need repaired/replaced, formal construction quote/bid from your contractor DURING due diligence period

  • Contingencies – include your assumptions in the written offer (property condition, title condition, use of property, occupancy, inspections, who is responsible for what and when, etc.)

  • Great Title Company – proven processes for title search, construction escrow, funding, document requirements, and closing procedures

  • Experienced Team – work with a team that has experience working together

  • Home and Pest Inspection – foundation if home inspection reveals questionable areas (sloping floors or cracks in foundation/walls)

  • Septic and Well Inspection

  • Rely on Due Diligence Process – if you Estimate and Assume to make an offer, you MUST VERIFY AND CONFIRM during your due diligence period. NO EXCEPTIONS!

  • Due Diligence Checklist


    What To Verify

    • unchecked

      Rent Range from Property Manager

    • unchecked

      ARV from Real Estate Agent

    • unchecked

      Confirm Repair costs with actual Renovation Quote from Licensed Contractor

      • unchecked

        Confirm walkthrough inspection notes, pictures, and home inspection

    • unchecked

      Confirm ALL applicable taxes with local city and county assessor

    • unchecked

      Confirm cost of insurance with insurance provider (standard coverage, flood, earthquake, high winds, etc.)

    • unchecked

      Loan Terms from Lender – to match anticipated close date

    • unchecked

      Home Inspection

    • unchecked

      Pest Inspection

    • unchecked

      Septic Inspection

    • unchecked

      Well Inspection

    • unchecked

      Zoning Ordinance to confirm planned usage, certifications required, etc.


    Timeline

    • unchecked

      10 day inspection period

    • unchecked

      24 hour pre-close inspection


    Contingencies

    • unchecked

      Verify ALL contingencies have been met PRIOR to expiration of timeline (condition, occupancy, broom swept, appliances, building material, appraisal, clear title, etc.)


    Closing Costs – Review the HUD/Settlement Statement

    • unchecked

      Who is responsible for delinquent taxes and/or utilities?

    • unchecked

      Who is responsible for transfer tax and title insurance?

    • unchecked

      Who is responsible for realtor commissions?

    • unchecked

      Do your loan terms match your projections (CASH FLOW MATTERS!)

    • unchecked

      Confirm CORRECT information on public documents (ownership name, address, etc.)

What's Inside Our Free Investor Toolkit?

  • Buy Box: An essential PDF version of Buy Box to help you define and refine your investment criteria. Helps you get started on your path to making informed investment decisions.
  • Building Your Investment Team: A comprehensive guide to assembling a robust investment team tailored to your needs.
  • Loan Term Sheet Request: A customizable template to request loan term sheets from potential lenders, ensuring you get the best financing options.
  • Private Money Lending Checklist: A tool and checklist to calculate and secure the appropriate loan amounts based on your investment needs.
  • Acquisition Checklists: Acquisition Pre-Close and Post Close Checklist to guide you through the steps involved in acquiring a property.
  • Real Estate Agent Questionnaire: Comprehensive list of questions to gather essential insights from real estate agents for personalized service.
  • Property Management Questionnaire: A detailed list of essential questions to get key insights from property managers to enhance service efficiency.
  • Contractor Questionnaire:Document designed to gather essential information from contractors involved in real estate projects.
Free Download

About Brett Riggins & Arin Riggins

We are Brett and Arin Riggins, graduates of Western Michigan University and licensed realtors in Michigan, South Carolina, and Tennessee. We have built multiple seven-figure passive income portfolios by purchasing and selling hundreds of homes. Over the years, we have worked with many physicians who privately lend us money for fix-n-flips and buy-n-holds. We constantly asked, “How can I get equity in these deals?” At first, we carried on with business as usual. Then it hit us. Physicians have a high income. Physicians pay a LOT in taxes. Physicians want to invest in real estate but don’t have the time. So, we asked ourselves once more: How can these physicians get equity in these deals? How can we come up with a plan that benefits all sides equally? What if we designed a service that allows doctors to fully own and manage their real estate assets while practicing medicine?  We crafted a plan of action, built the Real Estate Power Team, and the rest is history as of now. 

What Are You Waiting For?

Download Our Free
Investor Toolkit Today!

Download Free toolkit

Brett Riggins is a twenty year veteran of the real estate business whose passion is helping people connect with the life they want.

PROGRAMS

SERVICES

CONTACT US

Facebook Youtube Instagram Linkedin
Copyright © 2026 All Rights Reserved.

Download Free Toolkit

Instantly receive an email containing Free Investor Toolkit.

Download Free Toolkit

Instantly receive an email containing Free Investor Toolkit.

Subscribe Now

Instantly receive an email containing latest tips.