--- name: real-estate-analyzer description: Property valuation, market analysis, investment ROI calculations, comparable analysis, and rental yield assessment. Use when evaluating real estate investments, analyzing property markets, or calculating returns. --- # Real Estate Analyzer Comprehensive frameworks for property valuation, investment analysis, and market assessment. ## Property Valuation Methods ### Comparable Sales Approach (CMA) The most common method for residential properties. Relies on recent sales of similar properties. ``` COMPARABLE SELECTION CRITERIA: 1. Location: Same neighborhood or within 1 mile 2. Recency: Sold within last 6 months (3 months preferred) 3. Size: Within 10-20% of subject GLA (gross living area) 4. Condition: Similar age, updates, and maintenance 5. Style: Same property type (SFH, condo, townhome) 6. Lot: Similar lot size and features ADJUSTMENT CATEGORIES: + / - Location premium/discount + / - Size differential ($X per sq ft) + / - Bedroom/bathroom count + / - Garage, pool, upgrades + / - Lot size difference + / - Condition adjustment = Adjusted Comparable Value ``` ### Comparable Property Analysis Template | Factor | Subject | Comp 1 | Adj 1 | Comp 2 | Adj 2 | Comp 3 | Adj 3 | | ---------------- | ------- | ------ | ----- | ------ | ----- | ------ | ----- | | Sale Price | -- | | | | | | | | Sale Date | -- | | | | | | | | Distance (mi) | -- | | | | | | | | GLA (sq ft) | | | | | | | | | Lot Size | | | | | | | | | Year Built | | | | | | | | | Bedrooms | | | | | | | | | Bathrooms | | | | | | | | | Garage | | | | | | | | | Condition | | | | | | | | | Pool/Upgrades | | | | | | | | | **Adj. Price** | -- | | | | | | | | **Price/Sq Ft** | -- | | | | | | | ### Income Approach (Cap Rate) Primary method for commercial and multi-family investment properties. ``` NET OPERATING INCOME (NOI): Gross Potential Rent (GPR) + Other Income (laundry, parking, storage) = Gross Potential Income (GPI) - Vacancy & Credit Loss (typically 5-10%) = Effective Gross Income (EGI) - Operating Expenses - Property taxes - Insurance - Management fees (8-12%) - Maintenance & repairs - Utilities (owner-paid) - Landscaping - Reserves for replacement (3-5%) = NET OPERATING INCOME (NOI) PROPERTY VALUE = NOI / Cap Rate ``` ### Cap Rate Calculator | Property Type | Typical Cap Rate | Risk Profile | | ------------------ | ---------------- | ------------ | | Class A Multifamily | 4.0-5.5% | Low | | Class B Multifamily | 5.5-7.0% | Low-Medium | | Class C Multifamily | 7.0-9.0% | Medium | | Retail (NNN) | 5.0-7.0% | Medium | | Office (Class A) | 5.5-7.5% | Medium | | Industrial | 5.0-7.0% | Low-Medium | | Self-Storage | 5.5-8.0% | Medium | | Hotels | 8.0-12.0% | High | ### Cost Approach Used for unique properties, new construction, or insurance purposes. ``` COST APPROACH: Land Value (from comparable land sales) + Replacement Cost New (current construction cost) - Depreciation - Physical (age, wear) - Functional (outdated features) - External/Economic (market decline, location) = ESTIMATED PROPERTY VALUE ``` ## Investment Return Calculations ### Cash-on-Cash Return ``` ANNUAL CASH-ON-CASH RETURN: Annual Pre-Tax Cash Flow / Total Cash Invested x 100 TOTAL CASH INVESTED: Down Payment + Closing Costs + Rehab/Renovation Costs + Initial Reserves = Total Cash Invested ANNUAL PRE-TAX CASH FLOW: NOI - Annual Debt Service (mortgage payments) = Pre-Tax Cash Flow Target: 8-12% for buy-and-hold residential ``` ### Rental Yield Analysis | Metric | Formula | Good Target | | ------------------ | ------------------------------------------ | ----------- | | Gross Yield | Annual Rent / Purchase Price | 8-12% | | Net Yield | NOI / Purchase Price | 5-8% | | Cap Rate | NOI / Current Market Value | 5-10% | | Cash-on-Cash | Cash Flow / Cash Invested | 8-12% | | DSCR | NOI / Annual Debt Service | 1.25x+ | | Price-to-Rent | Purchase Price / Annual Rent | 10-15x | | GRM | Purchase Price / Gross Annual Income | 8-12x | ### Full Investment Return Template ``` PURCHASE ANALYSIS: Purchase Price: $__________ Down Payment (___%): $__________ Loan Amount: $__________ Closing Costs: $__________ Renovation Budget: $__________ Total Cash Required: $__________ MONTHLY INCOME: Gross Monthly Rent: $__________ Other Income: $__________ Vacancy (___% of GMR): ($__________) Effective Monthly Income: $__________ MONTHLY EXPENSES: Mortgage (P&I): $__________ Property Tax: $__________ Insurance: $__________ HOA/Condo Fees: $__________ Property Management: $__________ Maintenance Reserve: $__________ Utilities (owner-paid): $__________ Total Monthly Expenses: $__________ MONTHLY CASH FLOW: $__________ ANNUAL CASH FLOW: $__________ CASH-ON-CASH RETURN: ____% 5-YEAR PROJECTION: Year 1 Cash Flow: $__________ Cumulative CF (5 yr): $__________ Equity Built (5 yr): $__________ Appreciation (___/yr): $__________ Total Return (5 yr): $__________ Annualized ROI: ____% ``` ## Mortgage Payment Framework ``` MONTHLY PAYMENT (P&I): M = P [ r(1+r)^n ] / [ (1+r)^n - 1 ] Where: M = Monthly payment P = Loan principal r = Monthly interest rate (annual / 12) n = Total number of payments (years x 12) AMORTIZATION SNAPSHOT (Year 1 vs Year 15 vs Year 30): | Period | Payment | Principal | Interest | Balance | | ------- | ------- | --------- | -------- | --------- | | Month 1 | | | | | | Year 5 | | | | | | Year 10 | | | | | | Year 15 | | | | | | Year 30 | | | | | ``` ## Market Analysis Framework ### Market Fundamentals Assessment | Factor | Metric | Data Source | Signal | | -------------------- | -------------------------- | -------------------------- | ----------- | | Population Growth | Annual % change | Census, BLS | > 1% = good | | Job Growth | YoY employment change | BLS, local data | > 2% = good | | Median Income Growth | YoY change | Census ACS | > 3% = good | | Supply Pipeline | Permits issued | Census, HUD | Monitor | | Vacancy Rate | % of units unoccupied | Census, CoStar | < 5% = good | | Days on Market | Average DOM | MLS data | < 30 = hot | | Price-to-Income | Median Price / Median Income | Zillow, Census | < 4x = affordable | | Rent-to-Income | Monthly Rent / Monthly Income | HUD, local data | < 30% = sustainable | ### Neighborhood Scoring Matrix | Category | Weight | Factors to Evaluate | Score (1-10) | | --------------- | ------ | ------------------------------------------- | ------------ | | Employment | 25% | Job diversity, major employers, growth | | | Schools | 20% | Ratings, proximity, district reputation | | | Safety | 15% | Crime stats, trends, perception | | | Infrastructure | 15% | Transit, roads, walkability, internet | | | Amenities | 10% | Retail, dining, parks, healthcare | | | Growth Trend | 10% | New development, rezoning, investment | | | Affordability | 5% | Price relative to metro, rent trends | | | **Total Score** | 100% | | | ## Investment Property Scorecard ``` PROPERTY SCORECARD: Score each factor 1-5, multiply by weight. | Factor | Weight | Score | Weighted | | -------------------- | ------ | ----- | -------- | | Location Quality | 20% | | | | Cash Flow Potential | 20% | | | | Appreciation Outlook | 15% | | | | Condition / CapEx | 15% | | | | Tenant Demand | 10% | | | | Financing Terms | 10% | | | | Management Burden | 10% | | | | TOTAL | 100% | | __ / 5.0 | RATING: 4.0-5.0 Strong Buy 3.0-3.9 Buy / Hold 2.0-2.9 Hold / Caution < 2.0 Pass ``` ## Due Diligence Checklist ### Pre-Offer - [ ] Run comparable sales analysis (3-6 recent comps) - [ ] Verify rental income (request rent rolls, leases) - [ ] Calculate NOI, cap rate, and cash-on-cash return - [ ] Check zoning and permitted use - [ ] Review neighborhood crime statistics - [ ] Confirm flood zone and insurance requirements - [ ] Estimate renovation/repair costs ### Under Contract - [ ] Order professional inspection (structural, roof, HVAC, plumbing, electrical) - [ ] Order appraisal - [ ] Review title report and survey - [ ] Verify property taxes and assessment history - [ ] Obtain insurance quotes - [ ] Review HOA documents (if applicable) - [ ] Confirm utility costs (12-month history) - [ ] Environmental assessment (Phase I if commercial) - [ ] Verify all permits for past renovations - [ ] Review tenant leases and estoppel certificates ### Pre-Closing - [ ] Final walk-through inspection - [ ] Confirm financing terms and closing costs - [ ] Set up property management (if using) - [ ] Transfer utilities and insurance - [ ] Prepare lease agreements for vacant units ## 1031 Exchange Overview ``` 1031 LIKE-KIND EXCHANGE: Defer capital gains tax by reinvesting proceeds into "like-kind" property. KEY RULES: - 45-day identification period (ID up to 3 properties) - 180-day closing deadline - Must use Qualified Intermediary (QI) - Equal or greater value and debt required - Same taxpayer name on both transactions - Cannot receive "boot" (cash or unlike property) IDENTIFICATION RULES: 1. Three Property Rule: ID up to 3 properties of any value 2. 200% Rule: ID any number, but FMV cannot exceed 200% of relinquished 3. 95% Rule: ID any number if you acquire 95%+ of identified value COMMON PITFALLS: - Missing the 45-day or 180-day deadline - Touching proceeds (must go through QI) - Attempting related-party exchanges - Not matching debt levels (creates taxable boot) - Mixing personal use with investment use ``` ## Quick Reference: The 1% and 2% Rules ``` 1% RULE (screening test): Monthly Rent >= 1% of Purchase Price $200,000 property should rent for >= $2,000/month 2% RULE (strong cash flow): Monthly Rent >= 2% of Purchase Price Rarely achievable in appreciating markets 50% RULE (expense estimate): Operating expenses = ~50% of gross rent (excluding mortgage) Quick NOI estimate = Gross Rent x 0.50 70% RULE (for flips): Max Purchase = (ARV x 70%) - Repair Costs ARV = After Repair Value ``` ## See Also - [Finance](../finance/SKILL.md) - [Risk Management](../risk-management/SKILL.md) - [Investment Memo Generator](../investment-memo-generator/SKILL.md)