How To Run The Numbers On A Real Estate Deal

How to run the numbers on a real estate deal. So, I'm Laurel Langmeyer. I have been a real estate millionaire since 1999. I have done over a thousand deals and running the numbers is your most critical, critical piece of it. You have to know how to avoid the pitfalls of amazing mistakes. I don't know how many people must pick on you women a little bit. You love to look at the house and make it a home and this is not a home. This is either going to be an Airbnb, a short-term rental, it could be a duplex, fourplex. You know right now because of interest rates and I'm going to add insurance is something a lot of you are forgetting when you're looking at real estate right now, is that insurance is more and more difficult to get and more expensive to get than you've ever done before. So, make sure you're editing and modifying your cash flow spreadsheets and those of you who don't have a cash flow spreadsheet, they are all over the internet. There are some that are better than others. There are some that calculate IRR, some that calculate cap rates. So, let's get to the mistakes. Number one, let's get to number two, the five D's of due diligence that I wrote about in my wealth cycles book and last, a creative deal versus an emotional deal in real estate and there is a big difference because creative is knowing numbers at a very, very, very specific level and emotion is just emotion and the feeling of the day whether you like it or not. So, let's begin with the pitfalls. So, one of the biggest misconceptions and mistakes is that you think that you have to invest in real estate through an agent and a broker. There's nothing further from the truth. I haven't been an agent, haven't been a broker, don't want to be either of them. I have a lot of partners and teammates that are those and they act as those so we can actually keep that cash flow in the house but I don't do it. So, there's usually roles in a team. Somebody's going to be running the number of the analytics, doing the due diligence. Someone's going to be really working on the paperwork. It could be one person to do all of that and then you've got to be looking at what's the exit of this whole project. Once you get into it, how are you going to get out of it, when are you going to get out of it, what's the exit and design that as you walk into the project. There's so many of you, you're not looking at costs of what it is in 2024 when I've shot this video of what is the actual cost, what's the labor cost, what's the equipment cost. You've got to look at it. You also want to be very, very careful of the amount of scams. I call the internet the bathroom wall. So, the internet has more and more people out here and more and more scams out here and I've had some clients that I get at the other side of the scam where they actually got into a deal. They were going to do a note. They didn't do enough homework. They didn't know what to do and they got into a big scam and there's not even a property. The deed is a falsified deed. There is no land. There is no house. There is nothing and these happen a lot. The other big scam and I'm going to call it a scam. Now, is there real estate in this little one? Yes. So, there's another trick I'm going to call it where they want to spread you out into four or five states. You buy one single family house. There's a lot of groups that are doing this right now. So, you buy one single family house. They say buy six in a year and then they will manage them for you. They'll fix them up for you. Well, you're part of their enterprise and their whole ecosystem. They're not part of yours and is this what you want? Like, I can tell you personally why I would never want five or six single family homes in five or six different states with five or six different teams. First of all, it's a lot to manage. If you're only going to buy five or six homes, buy it with one or two different people. That's it. So, really narrow the amount of risk you're spreading out and have you ever met the management company? Have you seen the properties? Because usually what's happening is those kind of deals and again, they're not really a scam. They're just not a great deal because you're not at the threshold owning and controlling the project. You're just handing somebody money, letting them go shopping for you. Here's the real insight to that. They've already shopped. They actually probably bought a whole batch of 100 homes off of some bank out of some, you know, pre-foreclosure structure and they bought really cheap. They've already taken all their profits. Now, they're selling to you promising that they'll do the rehab, they'll do the management, they'll do everything. And by the way, in single family house in housing, if somebody promises you to do it all, it's actually a security violation. They have to give you choices of management, choices of construction. They have to give you choices. They have to give you up to three choices to not make it a security so you're not having to do a one-stop shop. So, just notice there's a lot of scams on the internet. The bathroom wall is horrific. Now, my second book, the Wealth Cycle Investing book, I have five D's of due diligence. So, get a pen and paper. I'm actually just going to read these off to you. The five D's of due diligence that I write about. Number one is the data, which is running the numbers. Gather all the relevant information about the deal. Includes the property values, the market trends, all the financials, taxes, insurance. Make sure you've checked with your county. If you're buying land, can you develop? Can you actually build what you want? I've had clients come to me, bought land, a lot of land, and then found out that the county won't let them build what they want to build. Or worse, the county commissioners before the change. So, notice if there's an election cycle, it's a big mistake on the data gathering because you're going to hear that the commissioners will allow it. Believe me, I've been at the other side of this. I would say a victim of it. And then all new commissioners got voted into the county and they denied our request for development or an RV park or storage or whatever we wanted to do. So, data gathering and knowing that trend is critical. Number two, discussion. Have meaningful conversations with your agents, with your mentor, your coach. That would be me for most of you if once you've decided to jump and come all the way into our big table. Tax advisors, all of it. How does it fit into your state? How are you actually going to keep it corporately structured? Are you going to keep it an LLC? Is it part of a series LLC? What are you doing with it? Number three is discovery. Look at all the comparables in your area. Look at other costs in your area. Look at what are the most successful investors in the area doing and what are those that are falling down doing. Number four is their diagnosis. So, again, numbers don't lie. People do. So, analyze again the conditions, the repair costs, the overall investment potential and really work with your tax team, with your mentor, with your guides and let us help come up with a real number that's not emotional. It's just the facts. And then the last is making a decision. Are you going to do the deal or not? And that is up to you and for the due diligence on your part. Before I go into creativity versus emotion on a real estate deal, I want you to subscribe to my channel. I want you here five days a week. Click that notification button so when I come out with a new video every morning, you are here. And if you want to grab our journal, it's in the description below because you can actually start writing a learning journal of what video, what day, what did you learn, what are you going to do? And now you're starting to put together a 365-day journal of learning and actions around becoming a real estate millionaire for those of you that want that. Now, creativity is putting a deal together in a unique way, meaning you could use other people's credit, other people's IRA money. You could use hard money lending. You could use 0% financing as a debt arbitrage. There's lots of ways to creatively put the deal together to bring in groups of people to reduce your risk and handle a lot of that due diligence as a team. Emotion is just emotion. Oh, it looks so beautiful. Oh, I love the neighborhood. You're not living there. So really be mindful. I think creativity and emotion sometimes gets the same definition and it's totally not the same. Creativity is strategic. It's negotiating and it's very, very, very well thought through and documented in writing and contracts. Emotion is just emotion and most of you will lose. So if you have any questions, want to hang out with us, work with us, call our office 775-588-9200. You can call or text that number and say, I'd like a one-on-one appointment to talk about becoming a real estate millionaire. And we'll be right there with you. Go to AskLaurel.com if you have any questions, A-S-K-L-O-R-A-L, ask questions, make a request. We'll be back tomorrow.