Why investment analysis?

Why investment analysis?

For conducting investment analysis for real estate, we can do that in three stages:

  • BUY
  • DO WORK
  • SELL

There is a first stage where we buy the property now when you buy the property.

This is where the profit potential of the investment is determined.

Because if you overpay here at this part, if you don’t pay the right amount and you pay too much, you’re not going to be able to maximize the profits of the investment no matter what you do to it later. So at the purchase, this determines the maximum profit potential that is even possible from the deal.

 

The second part is where we do some work.

This is where you try to maximize the potential profits as much as possible. So you might have purchased it at a good value, at a good price.

But if you do the wrong kind of rehab, you spend money on making repairs or developing amenities that are not needed, not demanded by the tenants in that market, then you’re going to waste money and you’re not going to maximize profits.

 

The third stage is if we sell it right when you sell it, that is when you realize the profits. So if you’re wrong about the excessive price that you can sell it for. Then you’re not going to make the profit that you thought you were going to make.

So of these three stages, the reason why we do investment analysis is so that you can maximize your Decision-Making or optimize your decision-making at each of these three stages.

The investment analysis helps you determine:

  • What is a good price of the property
  • What is needed to fix or build a particular property?
  • It can help you determine how much funds you have? 
  • What kind of rents would you need to achieve returns?
  • what do you need to sell this property for to get your investment returns, the ones that you are targeting?
  • Proper investment analysis allows you to compare different properties.
  • Proper investment analysis allows you to find the few winners among the many losers in investment real estate.
  • Investment analysis is about analyzing cash flows in and out.