Deal Analyzer For Flips

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3 Preview Of What You Will Learn Sections: Introduction...5 Using This Manual...7 Section 1: General Property Information...8 Section 2: Property Values & Pricing Section 3: Financing Costs...12 Section 4: Holding Costs...14 Section 5: Buying & Selling Transaction Costs...15 Section 6: Estimated Net Profit & ROI Snapshot...18 Section 7: Purchase & Deal Analysis / Potential Return & Profit Analysis...19 You Will Be Able To: Use the for Flips spreadsheet to perform a financial analysis on any property, and effectively use it in your business. DAF-V

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5 Introduction There are a variety of tools available to help provide you with the information you ll need to decide whether or not a deal is going to meet your own financial goals. When rehabbing a property to resell, the for Flips is a very powerful tool that will allow you to quickly and easily perform a full financial analysis on any property of interest. The for Flips has all the formulas you need already built into it. By inputting a few simple numbers, the spreadsheet will automatically calculate a variety of financial measures for you. It will provide you with the key information you need to make a fast, informed decision on whether or not you should buy a deal such as net profit, holding costs, and return on investment (ROI). At first glance, this spreadsheet may seem very complicated however, once you have the opportunity to work through it using this manual as your guide, you ll see that it s actually quite simple and straightforward, providing you with all the information needed to quickly and easily analyze any deal, right at your fingertips. 5

6 Introduction Property Address: 131 Richards Total Square Footage: 1,000 # of Units: 1 Occupied? (Y/N) Evaluator Name: JD Esajian Date: 9/12/13 N Property Description: Big Single Family Colonial in Bridgeport Property Values & Pricing Holding Costs (Monthly) Annually Monthly After Repair Value $510,000 Property Taxes $3,600 $300 Current "As Is" Value $230,000 HOA & Condo Fees $0 Estimated Repair Costs $150,000 Insurance Costs $2,904 $242 Purchase Price $234,000 Utility Costs (Expandable) $200 Gas $75 Water $75 Electricity $50 Other $0 Estimated Hold Time (months) 9 Miscellaneous Holding Costs $0 Purchase & Repair Costs: $384,000 Total Monthly Holding Costs: $742 Financing Costs Purchase+Rehab Buying Transaction Costs Perc. Of Purch Total First Mortgage / Lien Amount 61% $234,000 Escrow / Attorney Fees $900 First Mortgage Points 0 $0 Title Insurance / Search Costs 0.25% $1,085 First Mortgage Interest 7.00% $12,285 Miscellaneous Buying Costs $0 First Mortgage Monthly Interest Only Payment $1,365 Total Buying Transaction Costs: $1,985 Second Mortgage / Lien Amount 12% $150,000 Selling Transaction Costs Perc. Of ARV Total Second Mortgage Points 0 $0 Escrow / Attorney Fees $900 Second Mortgage Interest 12.00% $13,500 Selling Recording Fees $500 Second Mortgage Monthly Interest Only Payment $1,500 Realtor Fees 3.00% $15,300 Misc. Mortgage / Lien Amount 0% $0 Transfer & Conveyance Fees 0.12% $612 Misc. Mortgage Points 0 $0 Home Warranty $500 Misc. Mortgage Interest 0.00% $0 Staging Costs $1,500 Misc. Mortgage Monthly Interest Only Payment $0 Marketing Costs $500 Miscellaneous Financing Costs $0 Miscellaneous Selling Costs $0 Total Financing Costs: $25,785 Total Selling Transaction Costs: $19,812 Estimated NET PROFIT $71,740 Total Costs Return on Investment (ROI) 16.37% Purchase & Deal Analysis Estimated Net Profit and ROI Snapshot Potential Return & Profit Analysis After Repair Value $510,000 Assumes Sale is on or before 6/9/14 Purchase Price $234,000 Purchase + Repair Estimate Cost Per Sq. Ft $ Estimated Repair Costs $150,000 Down Payment Required at Closing -$148,015 Total Financing Costs $25,785 My Committed Capital $10,663 Total Holding Costs $6,678 My Annualized Cash on Cash Return % Total Buying Transaction Costs $1,985 Total Annualized Cash on Cash Return 21.83% Total Selling Transaction Costs $19,812 Purchase + Rehab Return on Investment (ROI) 18.68% 6

7 Using This Manual Big Single Family Colonial in Bridgeport Date: 9/12/13 N Holding Costs (Monthly) Annually Monthly Property Taxes $3,600 $300 HOA & Condo Fees $0 Insurance Costs $2,904 $242 Utility Costs (Expandable) $200 Gas $75 Water $75 Electricity $50 Other $0 Miscellaneous Holding Costs $0 Total Monthly Holding Costs: $742 Buying Transaction Costs Perc. Of Purch Total Escrow / Attorney Fees $900 Title Insurance / Search Costs 0.25% $1,085 Once you take a look at the for Flips, you ll quickly notice that some of the fields are highlighted a lighter shade. These sections are all areas where you can modify and input your own figures specific to your deal. Any field not shaded is a calculation-based field that you should not change we ve already calculated many of these figures, and the functions are already provided for you. In addition, you ll notice a slight red bar located in the right corner of each field. If you hover over each section, you can see that we ve provided the definition of each term listed. You ll know why it s included, how it s useful, and whether or not you should change it in your business. We want to make sure you become familiar with the for Flips and thoroughly understand how to effectively use it in your business. Throughout this system, we ll walk through the numbers on an example property located at Preston Lane. The numbers for this property have already been pre-loaded into the spreadsheet, and will serve as a great example of exactly how to utilize this effective tool. Compiling Your Data When you run the for Flips to work a financial analysis on your own deals, it s critically important that the numbers you input are accurate. Using the correct calculations will help to eliminate the unknown and allows you to manage risk. In turn, managing risk helps you to make offers without fear or hesitation. There s an old saying that applies here: Garbage in, garbage out. Do your due diligence and make sure you ve got your numbers right! Get the facts before you purchase any property this is the first step in making a good buying decision. 7

8 Section 1: General Property Information Let s take a look at the top of the spreadsheet. This section is where you should include general information about the property, such as the address, square footage, and a few other items. An extremely critical component in this section is located at the top right corner labeled: Occupied? (Y/N). In this field, you will need to note whether or not the property is owner-occupied. The answer to this question is important and will affect the amount of holding cost you incur. Property Address: 131 Richards Total Square Footage: 1,000 # of Units: 1 Occupied? (Y/N) Evaluator Name: JD Esajian Date: 9/12/13 N Property Description: Big Single Family Colonial in Bridgeport Property Values & Pricing Holding Costs (Monthly) Annually Monthly The spreadsheet automatically calculates property insurance based on its occupancy status. If the property is vacant, it will then calculate a builder s risk or vacant dwelling policy. This is a standard coverage obtained on a vacant renovation property however, it s much higher and generally more expensive than an owner-occupied policy. The difference in occupancy status will no doubt influence your bottom line, so make sure not to forget this very important step. 8

9 Section 2: Property Values & Pricing To calculate your potential profit on a deal, you will first need to gather some basic numbers on your property and then input it into the analyzer. These inputs include the After Repair Value, Current As-Is Value, Estimated Repair Costs, Purchase Price, and Estimated Hold Time. Knowing these numbers and using them to calculate your offer are critical to having a successful and profitable deal. Let s go through each. Key Terms After Repair Value Current As-Is Value Estimated Repair Cost Purchase Price Estimated Hold Time After-Repair Value (ARV) This is the value of the property after all repairs and rehab have already been completed. This is also known as Fair Market Value. Calculate your after-repair value by comparing the most recent and supported sales comparables in the area. At the property on Preston Lane, the after-repair value (ARV) is conservatively $510,000. This property will need a full rehab where we ll more than likely do a full expansion, so the value can easily go up to $550,000. However, when evaluating a property like this, and especially in a higher-price range, you ve got to adjust and be conservative with your numbers. Property Values & Pricing After Repair Value $510,000 Current "As Is" Value $230,000 Estimated Repair Costs $150,000 Purchase Price $234,000 Estimated Hold Time (months) 9 Purchase & Repair Costs: $384,000 9

10 Section 2: Property Values & Pricing Current As-Is Value Located directly underneath the ARV is where you will need to enter the current as-is value of the property. Now this value is what the property is worth exactly the way it sits in its current as is condition, without repairs or improvements. As you can see here, our current as-is value is right around $230,000. Property Values & Pricing After Repair Value $510,000 Current "As Is" Value $230,000 Estimated Repair Costs $150,000 Purchase Price $234,000 Estimated Hold Time (months) 9 Purchase & Repair Costs: $384,000 Estimated Repair Costs Based on your analysis, this is a dollar amount of estimated repairs needed to bring the property value up. Keep in mind that you will more than likely have a ballpark figure, because your numbers may change, and you should always be prepared for surprises. Property Values & Pricing After Repair Value $510,000 Current "As Is" Value $230,000 Estimated Repair Costs $150,000 Purchase Price $234,000 Estimated Hold Time (months) 9 Purchase & Repair Costs: $384,000 On this property, we estimate renovation costs to be about $150,000. This is not a concrete number, but strictly an estimate to renovate the property and expand upwards. Although a licensed contractor provided the estimate, it s not an exact number. Remember that these numbers often change, so always calculate some cushion in the rehab cost. 10

11 Section 2: Property Values & Pricing Purchase Price The last cell in that column is where you will enter the amount you plan to purchase the property for. In this example, our purchase price is $234,000. Property Values & Pricing After Repair Value $510,000 P Current "As Is" Value $230,000 H Estimated Repair Costs $150,000 I Purchase Price $234,000 U Estimated Hold Time (Months) This factor is very important. The amount of time you hold on to the property will determine your monthly holding costs and financing costs. Estimate the number of months you plan to own the property from the date purchase to close of escrow sale date. Now of course, this will depend on the length of time it takes to renovate, market and resell. It s important when you re first starting out to use at least 6 months as your hold time on a standard renovation. On Preston Lane, we know this is a much larger project that will involve architects and many visits from the city so we anticipate holding for at least 9 months. Property Values & Pricing After Repair Value $510,000 Current "As Is" Value $230,000 Estimated Repair Costs $150,000 Purchase Price $234,000 Estimated Hold Time (months) 9 $384,000 At the end of this section, it will calculate the figures above and automatically give you the total for JD Esajian Purchase & Repair Costs. Our total on the subject property is $384,000. Property Values & Pricing Property Description: 1,000 After Repair Value $510,000 Current "As Is" Value $230,000 Estimated Repair Costs $150,000 Purchase Price $234, Richards Big Single Family Colonial in Bridge Estimated Hold Time (months) 9 Purchase & Repair Costs: $384,000 Financing Costs Purchase+Rehab Total Monthly 11 Total Buying Tra

12 Section 3: Financing Costs This is by far one of the best sections in the this calculates all costs related to Financing the actual purchase and rehab. In this section, you will enter the different amounts you will borrow to purchase the property. No matter what method of financing you re using, you can calculate your costs including the first, second, and third mortgage amounts, along with any points and interest and other misc. points and financing costs. Key Terms Mortgage / Lien Amount (1st, 2nd, 3rd) Mortgage Points (1st, 2nd, 3rd) Mortgage Interest (1st, 2nd, 3rd) Mortgage Interest Only Payment (1st, 2nd, 3rd) LTV (Loan-to-Value) ARV (After Repair Value) Purchase & Repair Costs: $384,000 Financing Costs Purchase+Rehab First Mortgage / Lien Amount 61% $234,000 First Mortgage Points 0 $0 First Mortgage Interest 7.00% $12,285 First Mortgage Monthly Interest Only Payment $1,365 Second Mortgage / Lien Amount 12% $150,000 Second Mortgage Points 0 $0 Second Mortgage Interest 12.00% $13,500 Second Mortgage Monthly Interest Only Payment $1,500 Misc. Mortgage / Lien Amount 0% $0 Misc. Mortgage Points 0 $0 Misc. Mortgage Interest 0.00% $0 Misc. Mortgage Monthly Interest Only Payment $0 Miscellaneous Financing Costs $0 Total Financing Costs: $25,785 Estimated Net Profit a This financing section was created with the versatile real estate investor in mind. You have the option of determining your financing costs based on the way your deal is set up with your lender. You can choose from one of three options to determine your financing costs: Percentage of ARV: After Repair Value Percentage of LTV: Loan to Value (Purchase+Rehab) Percentage of Purchase Price only 12

13 Section 3: Financing Costs 1,000 JD Esajian There are many different financing options you can utilize when flipping deals. How do you want to finance your property? Here are a few different scenarios: Property Description: On this property, we re calculating the financing costs for the purchase & rehab. Let s say we found a private lender to fund the full purchase price of $234,000. So $234,000 is our first mortgage amount. We have no points, but we re paying the lender 7% interest on that loan. 131 Richards Big Single Family Colonial Purchase & Repair Costs: $384,000 Financing Costs Purchase+Rehab First Mortgage / Lien Amount 61% $234,000 First Mortgage Points 0 $0 First Mortgage Interest 7.00% $12,285 First Mortgage Monthly Interest Only Payment Purchase & Repair Costs: $1,365 Total The second mortgage is going to consist of the repair costs of $150,000. We ve financed this with a different lender, who charges a higher interest of 12%. So at this point, our total financing costs at the end of 9 months will total roughly $25,785. Let s try a different scenario, using owner financing for this property. Let s assume that the seller will finance After Repair Value the full purchase price of $234,000. They own it free and clear, so we would put that as our first Gas mortgage. Purchase Price Water They agree to take 7%. You ll see that our monthly payment is automatically calculated, if we were to pay on Electricity a lease monthly. Remember, Estimated Repair this is for Costs a 9 month hold. The second mortgage Second is still Mortgage the same Monthly as the Interest first Only scenario Payment we ll get a private $1,500 lender to finance Realtor the Feesrehab of $150,000 at 12%. Our total financing costs we ll pay out at the end of 9 months will total roughly $25,785. First Mortgage Monthly Interest Only Payment $1,365 Second Mortgage / Lien Amount 12% $150,000 Second Mortgage Points 0 $0 Second Mortgage Interest 12.00% $13,500 Second Mortgage Monthly Interest Only Payment $1,500 Misc. Mortgage / Lien Amount Property Address: 0% $0 Total Square Footage: 1,000 Evaluator Name: JD Esajian Miscellaneous Financing Costs Property Description: Total Financing Costs: $0 $25,785 Big Single Family Colonial i Total Se Property Values & Pricing Estimated Net Profit and Holding ROI Snapshot Costs (Monthly) After Repair Value $510,000 Property Taxes Estimated Current "As Is" NET Value PROFIT $230,000 $71,740 HOA Total & Costs Condo Fees Return on In Estimated Repair Costs Purchase & Deal Analysis $150,000 Insurance Costs Potential Purchase Price $234,000 Utility Costs (Expandable) $510,000 Assumes Sale is on or before 13 Total Bu 131 Richards # o $234,000 Purchase + Repair Estimate C $150,000 Down Payment Required at C Other Total Estimated Financing Hold Time Costs (months) 9 $25,785 Miscellaneous My Committed Holding Capital Costs Total Holding Costs Purchase & Repair Costs: $384,000 $6,678 My Annualized Cash on Total Cash Financing Costs Purchase+Rehab Buying Transaction Costs Total First Mortgage Buying Transaction / Lien Amount Costs 61% $234,000 $1,985 Escrow Total Annualized / Attorney Fees Cash on Cas Total First Mortgage Selling Transaction Points Costs 0 $0 $19,812 Title Purchase Insurance + Rehab / Search Return Costs on First Mortgage Interest 7.00% $12,285 Miscellaneous Buying Costs First Mortgage Monthly Interest Only Payment $1,365 Total Bu Second Mortgage / Lien Amount 12% $150,000 Selling Transaction Costs Second Mortgage Points 0 $0 Escrow / Attorney Fees Second Mortgage Interest 12.00% $13,500 Selling Recording Fees Misc. Mortgage / Lien Amount 0% $0 Transfer & Conveyance Fees Misc. Mortgage Points 0 $0 Home Warranty Misc. Mortgage Interest 0.00% $0 Staging Costs Misc. Mortgage Monthly Interest Only Payment $0 Marketing Costs Miscellaneous Financing Costs $0 Miscellaneous Selling Costs Total Financing Costs: $25,785 Total Se Estimated Net Profit and ROI Snapshot

14 Section 4: Holding Costs This section calculates your monthly costs incurred while holding a property. This estimated Holding Cost analysis provides you with information on Property Taxes, HOA & Condo Fees, Insurance Costs, Utility Costs, and other Miscellaneous Holding Costs for the subject property. This is the section that most investors rarely take into account when analyzing profit margins on a deal. We know the longer that you hold a property, the higher your holding costs will be so this is a crucial component that could make or break a deal at the end of the day. Key Terms Property Taxes HOA & Condo Fees Insurance Costs Utility Costs Holding Costs (Monthly) Annually Monthly Property Taxes $3,600 $300 HOA & Condo Fees $0 Insurance Costs $2,904 $242 Utility Costs (Expandable) $200 Gas $75 Water $75 Electricity $50 Other $0 Miscellaneous Holding Costs $0 Total Monthly Holding Costs: $742 Buying Transaction Costs Perc. Of Purch Total On this property, the total monthly holding costs will be about $742 per month. We ve entered in annual property taxes of $3,600, which will automatically calculate the monthly cost of $300. The insurance cost is also automatically calculated for you. For this property, there are no HOA or condo fees. Although it may not be necessary to change the utility numbers, you do have that option. If you have any other miscellaneous buying costs, you can include them in that field. For instance, let s say we want to include engineer plans to assist in the renovation; you can add the cost there. Helpful Tip! Holding costs are always just an average never an exact number. The amounts can slightly vary from month to month but shouldn t affect your margins that much. 14

15 Section 5: Buying & Selling Transaction Costs The transaction cost section of the For Flips is comprised of a mix of standard, pre-programmed figures (such as Attorney Fees and Title Search) and other costs associated with buying and selling property. Much like holding costs, this is another area in which many new investors don t calculate these costs when analyzing a deal. Buying Transaction Costs Key Terms Items such as escrow/attorney fees and title insurance are standard costs incurred when buying any real estate deal. Depending on your area, you will need to use either an attorney or an escrow company for your closings they will usually charge a percentage of the sales price. On average, title insurance is usually about 0.25% or ¼% of the purchase price, depending on your area. You will always need to obtain a title insurance policy to ensure that you have a clear and marketable title. When you enter the percentage in the spreadsheet, it will automatically calculate a total dollar amount for you. Escrow / Attorney Fees Title Insurance / Search Costs Selling Recording Fees Realtor Fees Transfer & Conveyance Fees Home Warranty Staging Costs Marketing Costs Enter any other additional costs you have in the Miscellaneous Buying Costs field. This is a custom naming field, which you can modify. According to our calculations on the subject property, the total buying transaction costs will be $1,985. $742 Buying Transaction Costs Perc. Of Purch Total Escrow / Attorney Fees $900 Title Insurance / Search Costs 0.25% $1,085 Miscellaneous Buying Costs $0 Total Buying Transaction Costs: $1,985 Selling Transaction Costs Perc. Of ARV Total 15

16 Section 5: Buying & Selling Transaction Costs Selling Transaction Costs Just as when you buy a property, there are always fees associated with re-selling a property. In this section, you will enter and track your closing costs, such as Escrow/Attorney Fees, Realtor Fees, Conveyance Fees, Recording Fees, and more. Most of these transaction fees are pretty static of course depending on your location and the deal, they will change; but if they do, not by much. Recording fees are those taken from the HUD and charged by escrow or title company. This is usually a flat-fee, based on your city or county. Let s refer to the Preston Lane property for a moment. $1,985 Selling Transaction Costs Perc. Of ARV Total Escrow / Attorney Fees $900 Selling Recording Fees $500 Realtor Fees 3.00% $15,300 Transfer & Conveyance Fees 0.12% $612 The typical Realtor Fees are 6%. However, this particular fee can change your numbers significantly, depending on whether or not you are a Realtor yourself. We are Realtors and own a real estate brokerage; so as you can see in the example deal above, we ve adjusted the Realtor Fees to 3%. Now keep in mind that these are selling transaction costs so in our case, we don t have to pay Realtor fees on the listing side, but only to the buyer s agent who brings the buyer. Once you enter in your percentage, the dollar amount will automatically calculate to the right. Helpful Tip! Realtor Fees are negotiable and can change. If you re a Realtor and own a brokerage, you should change your Realtor Fees to 3%. 16

17 Section 5: Buying & Selling Transaction Costs $1,985 Selling Transaction Costs Perc. Of ARV Total Escrow / Attorney Fees $900 Selling Recording Fees $500 Realtor Fees 3.00% $15,300 Transfer & Conveyance Fees 0.12% $612 Home Warranty $500 As part of your closing costs, your County charges transfer/conveyance fees for the transfer of land. This will typically amount to a certain percentage of the land value based on county assessor valuation. It's crucial that you research the correct percentage based on your location, as it can be vastly different. Based on our area, we ve entered 0.12% for the conveyance fees on this deal. Helpful Tip! Make sure to request a preliminary settlement statement (HUD) from your closing attorney or title company and figure out what your transferring conveyance fees will be on average in your area. We ve pre-populated the next sections with standard costs for home warranty, staging, and marketing. Home warranties offer protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; coverage extends over a specific time period and does not cover the home's structure. By staging your home, you re preparing the property for sale by bringing in furnishings and other items that show as if someone lives there. This will help to sell the property much faster and in most cases, get a higher price for it. Typical staging cost is around $1,500 but may vary depending on your listing timeframe and the staging company you choose. We also estimated $500 in marketing costs, which are related to offline and online advertising, printing, and promotion to help sell the property. Our total selling transaction costs are calculated at $19,812. $1,985 Selling Transaction Costs Perc. Of ARV Total Escrow / Attorney Fees $900 Selling Recording Fees $500 Realtor Fees 3.00% $15,300 Transfer & Conveyance Fees 0.12% $612 Home Warranty $500 Staging Costs $1,500 Marketing Costs $500 Miscellaneous Selling Costs $0 Total Selling Transaction Costs: $19,812 and ROI Snapshot 17

18 Section 6: Estimated Net Profit & ROI Snapshot Now that you ve entered all your numbers into the Deal Analyzer, the first place you should look is the bright yellow section towards the end. Here, you will find a quick snapshot of your bottom line, and give you an idea of your Estimated Net Profit & Return on Investment (ROI) that you can expect on the property. Your ROI is the percent of interest you ve earned based on your purchase plus ALL costs regardless of how long the property was held. When we refer to your Net Profit, this is the difference between the revenue and expenses of the entire project before income taxes are paid. Key Terms For most real estate investors, this section is going to be of greatest interest, because this is where you ll find out your Estimated Net Profit after accounting for the Sales Price and all typical selling expenses. Escrow / Attorney Fees Title Insurance / Search Costs Selling Recording Fees Realtor Fees Transfer & Conveyance Fees Home Warranty Staging Costs Marketing Costs Total Financing Costs: $25,785 Total Selling Transaction Costs: $19,81 Estimated Net Profit and ROI Snapshot Estimated NET PROFIT $71,740 Total Costs Return on Investment (ROI) 16.37% Based on all of our inputs on the example property, the spreadsheet calculated our Estimated Net Profit to be about $71,740, with a total ROI of 16.37%. 18

19 Section 7: Purchase & Deal Analysis / Potential Return & Profit Analysis There s many different ways you can use this For Flips. If you look at the very bottom of the spreadsheet, you ll notice two sections labeled: Purchase & Deal Analysis and Potential Return on Profit. These two sections are a summary of the numbers and details entered throughout the. It breaks down the revenue and expenses of the entire project, and provides a summary of key profit and deal value measurements. After all figures are entered into the spreadsheet, the numbers are automatically calculated in these sections for you. Keep in mind that you do not necessarily need these sections in order to make a buying decision. However, if you want to dig a little further into the numbers of your deal, then you ll find this section extremely valuable. Purchase & Deal Analysis Key Terms Annualized Cash on Cash Return Purchase + Repair Estimate Cost Per Sq. Ft Potential Return & Profit Analysis After Repair Value $510,000 Assumes Sale is on or before 6/9/14 Purchase Price $234,000 Purchase + Repair Estimate Cost Per Sq. Ft $ Estimated Repair Costs $150,000 Down Payment Required at Closing -$148,015 Total Financing Costs $25,785 My Committed Capital $10,663 Total Holding Costs $6,678 My Annualized Cash on Cash Return % Total Buying Transaction Costs $1,985 Total Annualized Cash on Cash Return 21.83% Total Selling Transaction Costs $19,812 Purchase + Rehab Return on Investment (ROI) 18.68% For example, if you want to know how much money you ve come out of pocket on the property, just take a look at the Committed Capital field. This can give you an overall view of how much money you ve put into the deal as the purchaser. The amount of Committed Capital we ve invested in the property on Preston Lane comes out to $10,663. Total Costs Return on Investment (ROI) 16.37% Potential Return & Profit Analysis Assumes Sale is on or before 6/9/14 Purchase + Repair Estimate Cost Per Sq. Ft $ Down Payment Required at Closing -$148,015 My Committed Capital $10,663 19

20 Section 7: Purchase & Deal / Potential Return & Profit Analysis But let s say you want to dig a little deeper and figure out where your property falls in comparison with others listed on the MLS in your area. That s where knowing the Purchase + Rehab Estimate Cost Per Square Foot of your property can be extremely useful. Dividing the Purchase + Rehab costs by the total square feet of the property will give you a cost per square foot. This is a great tool that can be used as a measurement market indicator. On this property, our estimated percentage of cash on cash return earned over a year period calculates to %. Total Costs Return on Investment (ROI) 16.37% Potential Return & Profit Analysis Assumes Sale is on or before 6/9/14 Purchase + Repair Estimate Cost Per Sq. Ft $ Down Payment Required at Closing -$148,015 My Committed Capital $10,663 My Annualized Cash on Cash Return % Total Annualized Cash on Cash Return 21.83% Purchase + Rehab Return on Investment (ROI) 18.68% If you are a new investor, don t let this section confuse you. We ve added a feature that allows you to close various sections of the if you don t want to look at them. This may make it easier to navigate. If you look to the left of the spreadsheet, you ll see small + and - buttons that can condense and expand each section, only displaying the final cost. Here s an example section: The fields in this section are expanded { Fields 8-16 are closed, displaying just the total cost { 20

21 Section 7: Purchase & Deal / Potential Return & Profit Analysis A detailed list of key terms and definitions are also built into the, as a tab displayed at the bottom of the spreadsheet. So, if you re plugging in your numbers and you re unsure of a specific term or field, just click on the tab labeled Definitions, and you ll see a glossary of every single term we ve mentioned. This will help you to quickly understand what each item is and why it s important in your calculations. 21

22 FortuneBuilders 960 Grand Avenue, San Diego, CA FortuneBuilders, Inc. All rights reserved. This information is for educational purposes. We don t believe in push-button profits we believe in proven business systems, education, drive and hard work. We are committed to teaching you how to reach your goals. In promoting our educational programs, we illustrate success stories. We want you to know, students are not compensated for their testimonials. However, many of our most successful students join our team as Coaches and Trainers. As stipulated by law, we cannot and do not guarantee results or offer legal advice. As with any business, your results will vary and will be based on your drive, effort, follow-through and other variables beyond our control. We believe in