I look at a very crude ratio: monthly projected income divided by asking price. High ratios are good, low ratios are poor. I like to see at least 1.2%.
That is for rental properties. For quick turn-over properties I want to see a potential purchase price of well below 80% of market value. Preferably below 2/3 of market value. Then of course, you have to subtract out expenses to fix up and holding costs.
Of course, with less down, one can afford to pay a little more, since your return on investment will be higher than when you have a high down payment.
If you have to ask, then the answer is… - Posted by eric-fl
Posted by eric-fl on September 23, 2003 at 10:57:24:
probably No. Just a general observation, over the past few months, I’ve noticed a trend where, people will bring deals & numbers to the board, that just don’t make sense. It’s as if, the expectation is, that if we just analyze it further, then it will get better.
Of course, this resource is here to analyze and offer alternative suggestions to tough situations, that’s what it’s for. But sometimes, a lot of times, a dog is just a dog. No amount of thinking about it or analyzing it is going to change that, most of the time.
So then, I guess I’m just kind of throwing this out there, as a general observation - “If you have to ask, it’s probably not a good deal.”
A lot of the deals presented by beginners are poor, it is true. They do not know how to analyze deals. And most properties offered for sale are not good deals, in my view.
However, there are some described that are super killer deals, and the poster doesn’t recognize it! Those are the ones I tell to tie it up with a contract and analyse it later.
The question then becomes: - Posted by Bryan-SactoCA
Posted by Bryan-SactoCA on September 23, 2003 at 21:43:24:
How do you know if it’s a good deal or not? All of the books and courses I’ve read don’t really cover this part, they use a standard formula to determine MAO or they don’t focus on it at all.