Napkin Math for Real Estate Analysis

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Ever feel like you're drowning in spreadsheets and second-guessing your real estate investment decisions? What if analyzing a property could be as simple as glancing at your watch? 

Today, I'm pulling back the curtain on my actual process for evaluating potential investment properties in under five minutes. As a full-time pilot and part-time real estate investor, I've had to develop systems that maximize efficiency without sacrificing accuracy. I walk through a real single-family property that I viewed just this morning—from the initial asking price of $79,000 to our final negotiated price of $74,000, and everything in between.

You'll discover exactly what I look for when walking through a property (hint: focus on the big-ticket items like roofs, mechanicals, kitchens, and bathrooms) and how I quickly estimate renovation costs without overthinking. I break down this property's projected monthly cash flow of $446, showing how a $30,000 investment (including down payment and renovations) can generate a healthy 17% cash-on-cash return.

This no-fluff approach strips away the complexity that keeps many would-be investors paralyzed. Whether you're evaluating your first deal or your fiftieth, you'll appreciate this back-to-basics method that relies on what I call "napkin math"—straightforward calculations that cut through analysis paralysis and get to the heart of what makes a deal work or not.

Got questions about my approach or want to share how you evaluate properties? Drop a comment below—I personally respond to all feedback, whether it's about the real estate content or suggestions for improving these videos. Your input helps make this channel better for everyone looking to build wealth through property investment.

Episode Transcript

Speaker 1 (00:00):
how to analyze a deal in under five minutes.
I'm just gonna take you throughwhat I did today.
This morning, 9.30, today'swhat is this?
May 16th, I went through asingle family house with my
buddy and he's like my trustedconfidant.
I have full faith in him thatif I do something dumb he'll be
there to save me and coursecorrect.
He's in the real estate gameday in and day out and, like you

(00:20):
may already know from the firstepisode, I'm a part-timer, I'm
a full-time pilot and this is mypart-time gig, hopefully one
day a full-time gig.
What do we do?
We look at the property.
Today I've got it all writtendown over here.
The property they were asking Ithink it was 79,000, from a
wholesaler.
I looked at the pictures.
The pictures actually lookpretty decent.
So I was like, okay, I think wecould do maybe 70.
I think I said 72,000.
I was like that's probablywhere we'll be at, but we'll

(00:42):
walk it.
So he said, hey, 930 tomorrowSound good, sounds good.
So we showed up, we walked theproperty.
It does not take much to analyzea deal.
You can get in, get out andit's pretty straightforward from
there.
So let's just go through thenumbers.
So they wanted 79,000.
We went back and forth a littlebit.
We ended up at 74.
That's the last thing.
I'm actually going to get thisdeal or not?
So I said $74,000.

(01:04):
We think is worth after it'sall cleaned up and ready to go.
Maybe about $120,000 was theguesstimate.
So there's a little bit ofequity built in there, which is
always good to have.
That's like a nice littlebackstop.
But you got to remember that'snot cash on the table, that's
just paper wealth, right, rehabcosts walking through it,
basically flooring, paint,mechanicals all look pretty good
, but flooring, paint bathroomsand some kitchen cleanup.

(01:32):
We estimated somewhere in the$5,000 to $10,000 range on the
low end and $10,000 to $15,000on the high end, and that's all
relative terms.
This is not Malibu I put onhere.
$10,000 to $15,000 is where Ithought we were at.
We were talking about putting aconcrete slab in the back too
for parking, because currentlythere's only street parking and
there's a huge back lot.
So we're like, oh, this is theperfect place to put a pad.
And Alex actually he was theone that recommended it, so I'll
give credit to him if he seesthis.
$12.99 a month is what we thinkyou can get for rent.

(01:52):
Don't ask me why $12.99.
That's a Milwaukee thing.
I don't know why $12.99, $13.99, $9.99, the same anywhere else.
If you're watching this andyou're from another place, leave
a comment, if you can, aboutwhat you guys do for your rent
numbers, because we do all thisweird 99 stuff and anybody
that's from out of state alwaysseems to think that it's the
craziest thing.
So $12.99 a month in rent,three bed, one and a half bath

(02:14):
tenant pays all the utilities.
So that kind of saves the owneras far as that goes.
$420 a month for the financing.
There's a month for thefinancing.
There's kind of two choices.
You can either go traditional,which would be 20% down at a
minimum, or you can go hardmoney, which would be zero down,
but you are going to pay higherfees.
Usually you're paying 15%interest over, let's say, six
month period and you're going topay an origination cost of a

(02:36):
couple points, which is usually,let's say, three points.
That'd be 3% of the total loanvalue.
So you're going to pay a littleover two grand probably for
that.
$133 a month in property taxes.
Simple enough, you just lookthat up.
$100 a month in insurance Iknow what insurance costs out
here because we've got otherproperties that are similar.
So I just roll and dice and sayabout $1,200 a year, $100 a
month for that, $100 a month forproperty management.

(02:57):
My property manager charges me8% a month on my properties.
So you take $1,299, I justguesstimated $100 a month is
probably right.
I just do napkin math.
I'm not a big brainiac, I'm anapkin math kind of guy.
$100 a month in work orders,$1,200 a year Could be light,
could be heavy, but I think it'sgood to build that in because
if you don't you're going to getburnt if anything happens.
And that puts us at $446 amonth in cash flow, which is

(03:21):
$5,300 a year just over.
And depending on if you do itwith zero money down or you do
it with a 20% down, I ran thisall as if we're going to put 20%
down and we're going to do$15,000 in rehab, so about
$30,000 all in.
It's running about 17% cash oncash.
And that is how to analyze adeal in less than five minutes.
Now I understand that I breezedthrough a lot of that stuff and

(03:43):
I didn't really give you a lotof context, but I wanted to at
least touch on that stuff andgive you an idea of what it
looks like to actually gothrough a property and say, okay
, what does this look like?
When I'm going to a property,I'm looking at some big stuff.
I'm looking at the roof, I'mlooking at windows, siding, okay
, and I'm just generally looking.
Is it new, is it old, is itbroken, is it in decent shape?
I'm looking at the kitchen andthe bathrooms to see what kind

(04:04):
of shape they're in.
Is it a tile?
Is it a surround?
Is it just gutted?
Who knows what it could be?
Take a note of that, becausethat's the kind of stuff that is
expensive.
And then the next one would beflooring.
If it's got carpet, it'sprobably coming out unless it's
really clean.
If it's got some sort of vinylplank, hopefully it's in good
shape.
If it's got hardwood floors,there's a couple choices.
Milwaukee there's a lot ofpeople are painting right over
the top of those bad boys, butyou could also potentially

(04:26):
refinish them.
The problem with refinishing isit expensive, it's time
consuming and in this game yougotta make some concessions if
you want to stay in business.
So you're gonna have to decidethat for yourself if it makes
sense.
We have basements here.
Not everybody has basements,but basements.
We got furnaces.
We got water heaters in thereand then we've got the
foundation.
Those are the big ones, furnace.
I'm looking to make sure that, ait operates.

(04:46):
B it's not 3,000 years old andthat's really it.
Furnaces come and go.
We replace furnaces all thetime Not all the time, but
enough that straight.

(05:07):
Is it damp?
These are things that you canascertain pretty quickly.
You don't have to be in theproperty for three hours to
figure that stuff out.
We see people all the time thatare sitting there and hemming
and hawing about all theselittle things.
Man, that's the stuff you need.
You can get all thatinformation in about five
minutes and you can get in andout and you got your number and
that's it.
So for me, I didn't want tospend more than I really didn't
want to spend more than 70, buthe said he was in it for 73.

(05:28):
He was super transparent.
He told me I'm in it for 73,.
Man, can you come up at all?
I said I can go with 74.
Maybe you can negotiate out andanalyze any deals now.
What is it good for you andwhat is bad for you?
To me, I'm aiming for a 20 cashon cash return, if I can get it

(05:50):
hard to get it sometimes,especially with the multi-family
stuff.
That stuff the cap rate getssqueezed and you're not going to
see those kind of deals.
But in the single family andduplex world not uncommon to see
, but you have to know whereyou're looking.
That comes with time and trialand error and, yeah, so
appreciate it.
Five minutes how to analyze adeal.
This video is going to run alittle longer than five minutes
and I apologize, but I try toget through all the bullet

(06:11):
points before the five minutemark hits.
So appreciate you watching andhope to look to you again on
another video.
If you have any feedbacklighting camera, anything at all
please let me know.
I'm here to get feedback andtry to do better.
Good, bad, indifferent leave itand I'll definitely respond to
it.
So I'll talk to you soon.
Thanks,