How To Analyse ANY Property Deal In 2 Minutes

Summary

In this video, the speaker shares a proven 2-minute property deal analysis system, refined over a decade of experience. They walk through the essential steps of assessing a property, including determining its market value using comparables, estimating potential rental income, and calculating key metrics like ROI. The speaker emphasizes the importance of considering long-term growth, identifying potential risks, and aligning deals with investment objectives. The video also includes tips for spotting property scams and offers free tools to streamline the analysis process, making property investing more accessible and efficient for beginners and seasoned investors alike.

Takeaways

• 😀 Takeaway 1: Overcoming analysis paralysis is crucial in property investing. Building a fast deal analysis system helps avoid missing opportunities.
• 😀 Takeaway 2: Use comparable sales (sold prices of similar properties nearby) to quickly assess the value of a property. Look for recent sales and adjust for market trends.
• 😀 Takeaway 3: If no perfect comparables are available, expand your search radius and adjust older sales prices for current market conditions.
• 😀 Takeaway 4: Rental income can be estimated by checking current asking rents on platforms like Rightmove. Look for signs of demand, such as many properties being marked as 'Let Agreed.'
• 😀 Takeaway 5: Be conservative when estimating rental income to avoid disappointment later, especially if rental prices are negotiable.
• 😀 Takeaway 6: Use spreadsheets to quickly calculate key investment metrics, such as cash flow, gross yield, net yield, and ROI, to evaluate if the deal meets your financial goals.
• 😀 Takeaway 7: ROI should be calculated excluding any mortgage, as it reflects the return on your personal investment (cash in).
• 😀 Takeaway 8: Consider the potential for capital growth in addition to rental income. A property may offer lower rental yields but significant appreciation over time.
• 😀 Takeaway 9: Always dig deeper to identify hidden issues with a property, such as structural or legal problems, even after initial positive assessments.
• 😀 Takeaway 10: There’s no such thing as a perfect property deal. The goal is to quickly filter out bad deals, keeping in mind that the process improves with practice and experience.

Q & A

What is analysis paralysis in property investing?

Analysis paralysis occurs when an investor spends so much time analyzing potential property deals that they become unable to make a decision, resulting in lost opportunities.

How do you quickly assess the value of a property?

You can assess the value of a property by comparing it to recently sold properties in the area that are similar in size, condition, and type. This is done by using comparables from real estate platforms like Rightmove.

What should you do if you can’t find ideal comparables for a property?

If ideal comparables aren't available, you can broaden your search radius up to half a mile, though keep in mind that properties further away are less directly comparable. You can also adjust older sales prices for market changes.

Why is using current asking prices less reliable than sold prices?

Current asking prices are less reliable because you don’t know whether the seller will achieve those prices. In contrast, sold prices reflect what buyers have actually paid in the market, giving you a more accurate gauge of value.

What tools can you use to track property price changes?

Browser extensions like Property Log and Property Tracker can help you track previous price changes on properties, giving you insight into the market's movement and helping you assess the accuracy of current asking prices.

What should you consider when estimating a property’s rental value?

To estimate rental value, look at similar properties currently on the market and those marked 'let agreed'. The number of available properties and the level of competition can indicate whether rental prices will be achievable.

What are the main metrics to focus on when analyzing a property deal?

The key metrics to focus on are cash flow, gross yield, net yield, and ROI (Return on Investment). ROI is particularly important because it reflects the amount of money you make relative to your personal investment.

What are the limitations of a property deal analysis spreadsheet?

While the spreadsheet is useful for calculating basic financial metrics, it doesn’t account for every possible cost, such as tax implications or unforeseen expenses. It’s designed to give a general overview rather than a detailed, exhaustive analysis.

Why is it important to factor in both rental income and capital growth potential?

It’s essential to factor in both because a property’s value might grow significantly over time, even if the rental income is lower. This could result in a higher total return over the long term, especially in prime locations.

What should you look for during a property inspection after you’ve passed the initial financial analysis?

During the inspection, check for potential hidden issues like structural damage, damp, or legal problems (e.g., a short lease or unapproved extensions). These issues may not be immediately visible but could significantly affect the investment.