Rental Property Analysis in 2024: Find Cash Flow Even

Ashley:
Analyzing properties accurately is one of the most vital, if not the most vital parts of breaking into real estate investing. Today, Tony and I are going to outline the top things you need to keep in mind when analyzing your first or next property. This is the Real Estate Rookie podcast. I’m Ashley Care and I’m here with Tony j Robinson.

Tony :
And this is the podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now we want your next property to be a home run. So today we’re going to discuss why you shouldn’t only chase cashflow, how to correctly do your market research and the top mistakes that rookies make when analyzing properties so you don’t do the same. Alright, Ash, let’s get into it for today.

Ashley:
So before we kind of get into the nitty-gritty of today’s episode, Tony, what is a deal early on that you analyze that was either a home run or there’s a major learning curve analyzing the deal?

Tony :
So we got to pour salt on some old wounds right now, I think for a lot of long time listeners at the podcast, they probably remember all of my exploits in the city of Shreveport, Louisiana. And I’ll share two deals really quickly because I think both illustrate what we’re trying to do here. But the very first deal that I did, it was a burr deal in the city of Shreveport, Louisiana. And it was a very, very solid base hit. It was a perfect burr, no money was left in the deal. I put in my property management company, it was a good rehab, we had good tenants and I was cashflowing maybe 200 bucks a month for my very first long-term rental ever. And I was like, okay, cool. I got good proof of concept here. The second deal that we did followed the same exact process.

Tony :
It was a perfect burr. We put a tenant in there, property management sold cashflow about 200 bucks per month. But unfortunately that second property, it was in a flood zone. And two things happened after about a year, year and a half of owning it, the tenants moved out and they kind of beat the place up when they left. And then our flood insurance premiums like four xd, it went from whatever, a thousand bucks a year to 4,000 bucks a year for our flood insurance premium. Something crazy. Anyway, we ended up having a really hard time trying to dispose that property, ended up finding some foundational issues that we had to fix before we sold it in, but I think we ended up losing like $30,000 in that property in the end. So I’ve seen it work really well. I’ve seen it go really bad, and that was literally my first two deals, a very good deal and a very bad deal.

Ashley:
Donate my story. My property to analyze I wanted to share is about flood insurance too. So for this property, I went off of the seller’s property disclosure. So this is the checklist the seller goes through with a real estate agent, and this is standard in New York, I dunno about other states, but the seller has to disclose if they know of any kind of damage or any repairs that are required for the property. So there’s all these questions and there’s a yes, like has there been foundation damage? And you can check yes, no. And most of the time a seller will go down and just select na, not applicable or don’t know, and so that they’re not held liable. So on this property I was underwriting, there was, it said, does this property have flood insurance? And I did not read correctly how this was phrased.

Ashley:
In my mind I read it as is this property in a flood zone? But when I went back after I found out the property was in a flood zone and required flood insurance was they were asking the seller if they had flood insurance on the property and the seller selected no, and they didn’t have insurance on it because there was no mortgage on it. And the reason most of the time people the flood get the flood insurance policy is because the mortgage requires it, where after you’ve paid off the property, you don’t have to have the flood insurance. You can get rid of that. And that’s common in areas where maybe there is a flood one time in the last 100 years that put it in there, but you may want to keep it if you’re in an area that does oftentimes have a flood.

Ashley:
So that was my big mistake was that I did not verify the information when analyzing this deal and I went ahead with the deal and didn’t take the time to actually look and see if the property was in a flood zone. And actually the person that caught it was actually my loan officer. When the underwriters from my loan were going through, they said, this property has to have flood insurance. And I went and got my quote and it was $2,500 for a $300,000 property. So now the goal is to just pay that house off as fast as possible and get rid of that flood insurance. But that for me was a big learning curve that no matter how experienced or how much I think I can understand to analyze, there are still oftentimes I miss things. And that’s why I need to remind myself to slow down, take your time and not rush through the analyzing of the deal and make sure to verify, verify, verify.

Tony :
But I think the other challenge too, Ashley, is that sometimes you can’t predict the future. We see what’s happening in states like Texas and Florida and it’s like as things like that happen, you can’t really predict that. So I don’t even know what the solution is because for us, we knew it was in a flood zone. We knew that the actual flood risk was super low, like the area hadn’t f flood like you said in a very long time. But we wouldn’t have anticipated a 400% increase on what we were paying for our premiums and it was just across the board. So I wish I had a good solution other than just don’t buy

Ashley:
In a flood zone

Tony :
Where you even have to consider flood or hurricanes or wildfires, whatever it may be because it’s such a precarious time right now for insurance providers in there. They’re just literally pulling out of places, leaving you with very, very few options that are cost effective.

Ashley:
So Tony, what are some of the different outcomes that rookies should be considering when getting started?

Tony :
So Ashley, there’s a few things and I think before we jump into the outcomes, I just want to clarify too, today’s episode, it’s not going to be one that’s super tactical, like hey, do this step to project your rents or things like that. What Ash and I want to cover are more strategic ways of thinking about analyzing deals that can kind of apply to any strategy of real estate investing no matter what it’s that you plan to do. So I just want to lay that foundation first. But in terms of the outcomes or maybe where Ricky should start first, Ashley, I think a lot of it comes down to what exactly that person’s motivation is. What is your person who’s listening or watching? What is your motivation for investing in real estate? And typically we see motivations fall into one of a few buckets. You have cashflow, obviously money coming in on a consistent monthly basis that you can use to fund your lifestyle.

Tony :
Sometime down the road you have the wealth building aspect of real estate, which is the appreciation where the value of your properties increasing over time. You have the loan pay down where your tenants or your guests or whoever are paying down the mortgage balance, which builds your equity. So you have the cashflow, the equity build, you have the tax benefits. There’s a lot of amazing tax benefits that come along with investing in real estate. There’s a lot of folks who do this business at a very high level that pay very to little, very little to nothing in taxes. So the tax benefits are a big thing. And then just identifying what’s your strategy, right? Are you looking for value add? Are you looking for turnkey? Are you looking for commercial? Are you looking for single family? Are you looking for what is the actual strategy that you feel makes the most sense? So for me, Ashley, I think it’s starting with those motivations and getting a sense of what it is you want out of this

Ashley:
And kind of tying down your why. So if your why is financial freedom and you want to quit your job, then maybe cashflow is the most important. If it’s because you’re going to stay at your job but you don’t have any type of retirement, then maybe appreciation is more important that you want to be able to sell your properties when you’re ready to retire. Maybe it’s just because you want to have equity available that you want to be able to tap into that equity when you do need cash or you do want to go and purchase something else. So think of your why and then kind of base it off what is important, what outcome is important from the property that you’re purchasing to define your strategy. And one big disclaimer I want to give out before we go any further is just because a market works for somebody or a strategy works for somebody doesn’t mean it’s going to work for you. And that’s why you need to understand all the components of what is that person’s why make sure it actually fits what you want to get out of real estate investing.

Tony :
You make a really important point about aligning with what is that you actually want. Because I think the question that you and I often get is, well Ashley, Tony, what is a good deal? Or is this a good deal? And it’s so hard to answer that question because good is going to be based on what your motivations are as a real estate investor.

Ashley:
Let’s talk about if you’re looking for cashflow, what are the type of deals that you actually need to look for right now in today’s market? So to first kind of define a cashflowing deal, let’s talk about different properties you could buy. So there’s turnkey and then value add. Tony, you want to take turnkey and then I’ll take the value add.

Tony :
Yeah, so turnkey, right? We will define it and then we’ll go over the pros and cons. So turnkey, exactly what it sounds like. It means as soon as you step in, you can turn the key and it’s ready to go. So there’s very little work that you have to do to get that wrapped up and running. So the pros of a turnkey property, and guys, there are tons of turnkey providers out there. Like Memphis Invest is one of the folks that works with BiggerPockets rent to retirement’s another one as well. So there are lots of turnkey providers out there so you can dig in and do some more research, but the pros are that it’s very little work for you to find source and set up this property. A lot of these bigger turnkey providers have websites you can go on that look and feel very much like a Redfin or a Zillow where they have all their listings.

Tony :
You can pick the one that you feel kind of aligns with you the best. A lot of times they’re already renovated, they’re placed with tenants already, and you literally just get to take over a cash flowing asset that is the benefit. Very low friction, very easy to get access. They’ve already done all the hard work of sourcing the off market deal or sourcing the value add opportunity or renovating it, placing the tenant. Now they’re just handing you the keys. Now the cons with turnkey is that you are paying a premium for the work that’s already been done. So to me, I think that’s the biggest con of the turnkey is that you are missing out a lot of the value add opportunities there.

Ashley:
And then as far as the value add, think about the time commitment too. So there’s going to be more of your time involved than actually going and purchasing a turnkey property. The big question is can you do that in today’s market is to actually go and just purchase properties below market value, do very little to them and then go ahead and have them praise for what you need to or to actually sell the property or to rent it out, whatever your end goal may be. And there are definitely ways to do that is to purchase properties below market value today. And I think that could be a whole nother episode of sourcing deals where we break down different ways to source deals. But just to give you some insight to the properties that I’ve bought recently that I bought below market and I’m adding value to them also have been from pocket listings where real estate agents have reached out to me before the property goes out live and they’re letting me get almost a first dib at purchasing the property. So there’s definitely a way to make those connections with real estate agents. So if you want to go to biggerpockets.com/agent finder and talk to an agent and let them know what you’re trying to do, what you’re looking for so that you get to know first about these properties when they do come available.

Tony :
And Ash, one thing I’d add to that, I do think it’s getting a little bit more challenging right now to find those value add opportunities, but I mean you can still potentially find opportunities listed as well where there’s some upside.

Ashley:
Yeah, that’s a great point I think too is looking at your market, where’s kind of that sweet spot of like, okay, all the dilapidated properties, that’s where the extreme house flippers are going after them, those get taken off the market or the houses that are already done, they’re finished, they’re complete. Is there some kind of middle of the road where there’s not enough value add for the investors that are constantly going after the market but not enough for somebody to want to have to redo the cabinets or things like that. So looking in your market and watch days on market, watch the properties, start an Excel spreadsheet, get freaky in the sheets and track how long properties are staying on the market and make notes about it. This property has three beds, two baths, it’s outdated and notate different things. So you can just go back and look at your sheet and see what are the differences between properties that are selling very quickly and which ones are sitting on market longer.

Ashley:
And those ones that are sitting on market longer, what is similar about them so that those are properties that maybe there’s some way you can tailor your buy box to those properties where maybe you’re going to have more an advantage or want it more for some reason than someone else because they’re not thinking out of the box of what they can actually do with this property too. So I want to touch on market conditions too. You kind of did a little bit Tony, and just real quick to kind of add things are changing and interest rates did come down a little bit, but it’s also election year and people are scared to make big financial decisions around election time until they know what kind of the future is going to hold depending on who is elected as president. So I think as an investor, especially if you’re going to be going after a buy and hold property where you don’t need to sell it, you are going to get locked into a 30 year fixed rate loan.

Ashley:
And a lot of the actual political moves that are made aren’t going to hugely impact your property unless maybe you’re buying a rental and the landlord law completely change in your property and you end up having a tenant you need to evict. But besides that as to during that time these upcoming months, there may not be as many buyers because people are waiting to see who is elected. So as an investor, some of the best times to buy and get the best deals are when other people are sitting out on the market. Think of 2020 when Covid hit, nobody was buying and that was when everybody got the best deals and everybody regrets not buying more properties during that time. So kind of look at these upcoming months as maybe a window of opportunity where there’s not going to be as many people making huge financial decisions during that time.

Ashley:
And this is just a prediction of course, but take it with a grain of salt. Okay, stay tuned because we’re going to find out more about how you should be adjusting your strategy and in a high interest market. But first, let’s take a quick at break. Okay, welcome back. Thank you so much for taking the time to check out our show sponsors. So one of the second biggest metrics to looking at investing, which we kind of touched on a little bit is interest rate. So Tony, how important is the interest rate when analyzing a deal? Yeah,

Tony :
The first thing that I want to say, and I just want to, if I could shout this from the mountaintops with the megaphone, this is what I would say is that you shouldn’t stop buying deals just because the rates are higher. And I think there’s a lot of people who are like, yeah, it’s a good deal, but I don’t want an 8% interest rate or I don’t want a 7% interest rate or I don’t want a 6.5% interest rate and my stomach does turns when I hear that because people don’t understand that the rate is temporary, but the property is forever or as long as you want it to be. And there’s a few things we need to consider first is that say you find a deal today and it meets your cashflow requirements at a 7.5% interest rate on your mortgage, it would be silly not to buy that deal if it meets your cashflow requirements because only two things will happen. Either rates will go down and you can refinance that 7.5 down to a six or five and a half, whatever it falls to, or rates will go from seven and a half to nine, which based on what we’re seeing right now is probably not going to happen, but rates could go up and then you’ll be upset that you didn’t buy at a seven and a half because now you’re paying even more. Those are the only two options. So if the deal makes sense, I say move forward with it.

Ashley:
Yeah, so I think that’s a great point as far as looking at interest rates and you definitely should be taking it into account when analyzing your deal. So the best way to actually find out what your interest rate would be is to go and get pre-approved from a lender and to find out, here’s what I’m trying to do, what are the current market rates? So every time I’m looking at a property, I email a loan officer and I say, if I were to close today, what would my interest rate be? And they can usually give you a really great ballpark and it’s going to depend on the type of loan product you’re also getting as to what your interest rate is going to be. And it’s very important, but like Tony said, it is temporary. So if you can make the deal work today right now with an 8% interest rate, imagine if rates do drop and you’re able to go and refinance and get a lower rate, your payment is going to be lower and you’ll have more cashflow.

Ashley:
So definitely don’t get too caught up on the fact that interest rates are higher because all you’re doing is you’re getting a little bit of jealousy because you’re jealous of those people that bought in 2021 and 2022 that get those 2%, 3% interest rates with those days are gone and we have to live with ourselves and we have to continue on down the road of investing because it also could come to a point where people are saying, oh, Ashley got that 8% interest rate and now I’m paying 12%. Rates could go up, we don’t know and I’m not even going to take my time to even worth guessing what’s going to happen to them

Tony :
As one thing that I think is important to call out here as well, and I was pulling up one of the mortgage calculators where you were talking right now, and I plugged in a $500,000 loan at a seven and a half percent interest rate. So $500,000, half a million bucks at a 7.5% interest rate, that’s a monthly payment of $3,496. So $3,496, $500,000, seven and a half percent say that that’s the property you have the ability to buy today and you’re like, I’m going to wait until rates drop and maybe rates drop down to 6.5%. You’re like, man, okay, I’m ready. But now that property that you’re looking at, prices have gone up, the listing prices now instead of $500,000 is $550,000, but now there’s 20 other people who have submitted on that same property. You guys might think that I’m being facetious here that I’m joking, but there were times in 2021 where we were literally competing with dozens of other people on the same property.

Tony :
So now you’re competing with 20 people. And now in order to make your offer competitive, even though it’s listed at five 50, you’re going to offer 600 to make your offer really, really strong. If we do the math, 600,000 at a 6.5% interest rate is $3,792. So remember at the higher interest rate at 7.5%, your payment’s about 3,500 bucks per month. The lower interest rate with the higher purchase price, you’re at 3,800 bucks per month. So even though you’re saving a point on the mortgage, because there’s this upward pressure on prices, when there’s more demand, you could potentially end up paying more per month for that same exact property.

Ashley:
And think about that price difference too. You have to pay that off. You don’t have to pay interest forever. You could go and refinance or you could pay the loan off and you’re not paying that high interest rate anymore, but that purchase price, you eventually have to pay all of that off. So if you are paying more, that’s more, you will 100% still owe on the property. So even if you sell the property, you’re still going to have to pay that amount to pay off what’s left on the mortgage. If you sell the property and have the lower rate and the lower amount of mortgage balance actually due, then that’s not as much you have to pay up to. So definitely a great way to think about it. And Tony, let’s go over real quick some ways to actually get creative with interest rates right now.

Ashley:
So maybe different ways that you can actually purchase a property without just going and getting an investment loan where you’re putting 20% down and paying 8% on it. So the first thing that I thought of was actually refinancing your home, your primary residence or getting a line of credit on your primary residence, then taking that money and using it to purchase your investment property. So maybe you’re somebody who owns your property free and clear and like me, that helps you sleep at night. You don’t want to have debt on your personal assets, but that could be a huge advantage because on your primary residence, you are going to get the best rate out of probably any other property you buy unless you’re doing seller financing. This is going to be the best rate that a bank or a lender will give you on your primary residence. So tapping into that equity and using that to purchase your investment property, then all you do is that difference Now in your mortgage payment or the payment on your line of credit, your investment property is going to be paying that portion of your mortgage that you took out to fund that property. So looking at different ways to get creative like that. So Tony, is there anything that you can think of offhand?

Tony :
Yeah, I think seller financing is another really solid way to navigate or get creative around the elevated interest rates right now.

Ashley:
Yeah, 100% agree. And the last thing before we move on is having an exit strategy goal. So if you are looking at a property that’s maybe going to have a lot of appreciation that you’re predicting or the market is dictating, then maybe you have a goal that you’re going to sell this property in three years or five years. So you are only looking at the amortization and the interest you’re paying over the next five years until you sell the property. If you’re able to make a great profit on that property when you sell it in five years, who cares how much you paid in interest because it is going to be more of a than if you didn’t purchase the property because of the interest rate on it. So setting a timeline for yourself as to, okay, you know what, in three years or five years, if rates have decreased, I’m going to go and refinance.

Ashley:
If the market has gone up and properties are selling well, then I’m going to sell the property. Worst case scenario, I keep this property with the interest rate and I continue on and I set a goal of another two years. Let’s do another temperature check in two years, should I refinance? Should I sell the property? So you could even do this yearly too, but the most important thing is make sure the numbers work now on the property before actually going in. Do not bank on interest rates going down and paying into your LLC property every month to sustain it because you think in two years interest rates will go down, you can refinance, do not bank on that. But if you need help running the numbers on your property, make sure you go to biggerpockets.com/calculators and for every number you need to input, there is going to be a section to help guide you through the numbers on this.

Tony :
And Ash, you and I personally have seen the benefit of the BiggerPockets calculators. We obviously wrote the book together on partnerships for BiggerPockets, and if I’m not mistaken, I think both of our partnerships started with a calculator from BiggerPockets. I ran the deal, I put it in the calculator, and I emailed that over to a few people and said, Hey, who wants to partner with me on this thing? And for you, the same thing. So the calculators have started the careers of the folks you guys are listening to on the rookie podcast right now.

Ashley:
So Tony, what would be your recommendation when using the calculators? And this could be tailored towards interest rate or other numbers you’re inputting. What would be your biggest piece of advice when inputting data into the calculators?

Tony :
You got to sharpen your pencil. I think a lot of people don’t take the time to really dial in the numbers that they’re putting in. So say that you live in California and you’re looking at buying a property in Columbus, Ohio, never been there before. Don’t know anyone that lives there, but you read the data that Columbus is a booming place to invest. You started analyzing a bunch of deals, but you have no frame of reference for things like insurance costs. You have no frame of reference for things like utilities. We don’t get snow in California. So like plowing the driveway that wouldn’t even know if that’s the thing you have to do. So I think really understanding all of the numbers you’re putting in and taking the time to go talk to an insurance agent that works in Columbus, taking the time to go talk to a property management company and say, Hey, what are some of the utilities or some of the expenses around the property I should be expecting going and figuring out what is it going to cost to whatever those expenses are. But I think just really understanding all of those details and not just taking this kind of wild guesser relying on a Google search to give you that information.

Ashley:
And some of you OG listeners may remember the day when Tony on this podcast learned what a well was and how that some properties obtain the water for their plumbing from a well.

Tony :
So I still don’t understand the science

Ashley:
Even like a scenario like that. And I think about that all the time. I just bought in a different county and I’ve bought in other counties before, but this county was insanely different. And I just thought about these investors that are buying all over the world, how intricate their team must be and their resources to actually find out all these different, first of all laws and rules and regulations for that county, how they do closings, how the property operates, how utilities are different, things like that. So definitely understanding your market and reaching out. Use the BiggerPockets forum, say, Hey, I’m looking to purchase a property in this town, this city, other investors, what are some things that I need to know or write up specific questions as to what are the most common utilities? Are there any kind of utilities that people don’t like to have around us?

Ashley:
There can be wall furnaces in some old houses and insurance companies don’t like to put policies on them because they’re more of a fire hazard than your conventional furnace. So learning about different things in your market, you’ll always be learning these things, but reaching out and gathering your resources as much as possible as to what are things that are going to impact your investment money wise, the dollar wise as to your insurance premium going up because it’s a row house, it’s right next to someone and the insurance company charges you more for that. Something else I have learned from experience, but besides interest rates, what are some of the other considerations that need to be made when analyzing a property?

Tony :
We talked about property taxes a lot already. We talked about insurance a lot already. I think one of the other things that are important to consider are you’re just kind of long-term capital improvements to the property. Things like replacing your roof, things like buying a new water heater. Anything that’s a big structural part of the property that could potentially impact the value of that property down the road are things you want to set aside money for. Just as a quick caveat here, for my short-term rental folks as well, that’s a lesson that I think that we learned is that in addition to capital improvements, it’s also good to have money set aside if you’re an Airbnb host for experience improvements because as the market starts to evolve and more people come onto the platform, you’re competing with more properties. It’s the folks who can really continue to provide a better experience for their guests that continue to do well. And that’s been a big focus for our portfolio for the last 12 months or so, is reinvesting and adding things like in ground pool, game rooms, et cetera, et cetera, to make our properties more competitive. So slice and away a little bit of money for that. So the capital improvements for all properties. And then if you’re in the short-term rental side, the experience improvements as well.

Ashley:
The next thing I’ll add is also the tenant pool. So when you’re looking at analyzing a property, is there a demand for rentals? What is the location in the area? Is the rental actually in an area where people want to be or is it high crime? And sometimes high crime areas can actually affect your class of tenant too. Are you going to have people that are struggling and is it going to be very low income property, but yet you want to put quartz countertops into this property, you’re just not going to have that high class or that upper class of tenant pool because of the location in the area that you’re in. So really looking at the demographics, what is the average income of that property to, and that kind of gets more into market analysis, but market analysis I’ve realized with a lot of different platforms and when you’re doing it, make sure you’re really niching down by neighborhood and you’re not just doing the city as a whole because it changes so much as you’re moving from street to street. And then the last thing is just knowing what the laws and regulations are in that area too, as to can you even do a short-term rental therapy? You’re going to buy

Tony :
It. One thing I would add to that, Ashley, just about the tenant pool really quickly is there’s a lot of people who say, I’m never going to invest in a class neighborhood because if the economy shifts, so there’s a recession, those get hit hard and those people are going to be moving into the B and the C class. There’s people who say, I’m never going to invest in a D class neighborhood because there’s too many issues, there’s too much crime, there’s too much this, there’s too much that the tenants are a headache, et cetera, et cetera. My point in saying that is that there are people who were successfully doing each one of those strategies. There are people who focus on the neighborhoods that are maybe a little bit tougher, that are probably underserved with good landlords because there is a stigma around that and they found a way to do it really successfully.

Tony :
And there are people who focus really on just the highest of the nicest luxury kind of rentals as well, and they do a really good job with that as well. So I think the question is consider the tenant pool, but also consider what tenant pool do you align best with? And do you have the stomach for the ups and downs to come along with going into the rougher neighborhoods where maybe the price points lower, but the tenants are a little bit tougher. Or going into a class neighborhoods where maybe the demands of the tenants are a little bit higher and there’s a little bit more flexibility or variability I guess, and how often folks want to book those kinds of properties.

Ashley:
Next we’re going to hear all about the biggest mistakes that rookies can make when analyzing deals. But first, a quick break.

Tony :
Alright, so we are back from that break. And Ashley, I want to finish off by just talking about maybe some of the biggest areas that we see rookies overlooking when it comes to analyzing properties. I’m going to start with one because I think this is one that we continue to get reminded of every single year, right around tax time. That’s the admin side of running this business. So in addition to the property specific fees and costs, you also have just your general business related costs as well. So for us in California, we have to pay a fee every single year just to have an LLC open. We have to pay separate tax returns for every single entity that we have. So we’ve got to pay a CPA to do those tax returns for us, right? Then you have to pay the taxes on the income, so the bookkeeper, right? So there’s a lot of business related things that people tend to overlook. So just making sure that you’re setting aside a little bit of money every single month for those things as well. That way you’re not in scramble mode when tax time comes around.

Ashley:
The next thing I would add is the timeline. So the timeline of various different things. So the timeline of closing on your property as to, okay, how long until you’re actually going to close on the property. The next thing is when you’re rehabbing a property, how long are you actually going to pay holding costs before you can go and refinance, before you can sell the property. And even when you do have a property under contract, say you’re selling it or maybe you’re starting the refinance process, and some states it can still take 30, 45, 60 days to actually close on the property or close on your refinance. So even though the rehab may be done, you’re still going to be paying those holding costs, whether that’s maybe a hard money loan you took out or maybe a line of credit of your own that you’re using the fund the deal, or even if you’re using your own capital, that’s money sitting that could be sitting right now in a five and a half percent interest bank account.

Ashley:
So understanding your timeline and really, really having a good estimate or even overestimating a little bit. And that’s one thing we’ve learned from flippers that come on here is that they’re usually giving themselves a month or even two months cushion. If they finish early, great. They have two months of holding costs they didn’t pay. So looking at your timelines of when things will actually happen with the property that affects your money, affects your financing on the property. Take that into consideration when analyzing your deals and do not expect to finish your property in a very, very eager matter. And there definitely leaves some contingencies in there.

Tony :
Well, Ash feels like we covered a lot. And like I said, I think the focus of this episode was to give all of the rookies who were watching and listening, not only some tactical things they can go implement, but just the higher level strategic decisions they need to make. And it feels like we delivered on that.

Ashley:
And if you guys like the style episode, please let us know. You can comment on YouTube or you can leave a review on your favorite podcast platform and maybe we’ll do some more of ’em and switch it up a little bit and try out some different things. So thank you guys so much for listening. Thank you for watching. If you’re on YouTube, make sure you hit that like and subscribe button and we will see you guys next time. I’m Ashley. And he’s Tony. Thank you for listening to the Real Estate Rookie podcast.

Tony :
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony :
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.