There are just no shortcuts when it comes to fully understanding your real estate investment project numbers.
And do not kid yourself. Your real estate funder is going to review your deal very carefully before offering you financing. Investment lenders are experts in looking at real estate investment property numbers, so if you have missed something or have been overly optimistic about your project values, they are going to spot that quickly.
That is great news and can be immensely helpful if you have truly done your homework and you understand your real estate investment project inside and out. That is not such great news if you are flying by the seat of your pants … and flinging out numbers to your real estate funder based on hopes, dreams, and prayers!
So, what this means is that you really need to get down to the nitty gritty on your financial pro forma, which is the spreadsheet that tells you whether your real estate investment project is viable as a profitable venture.
We have the perfect tool to help you get your project costs dialed in.
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This spreadsheet will help you see what we here at i Fund Cities
use to understand and underwrite deals of 1 to 4 units.
You should have every cost you will incur in your real estate investment project in this spreadsheet, including asset purchase costs, financing loan fees from your real estate funder, holdings costs (taxes, insurance, and utilities), selling closing costs and realtor’s fees, and any soft costs along the way (things like zoning, architect, environmental, and permit fees).
The same goes for the contractor’s estimate for your real estate investment project. You are going to want a detailed project estimate that takes you from permitting through landscaping, including everything in between.
Once you have these numbers together, think through what could go wrong with your real estate investment project and/or your real estate funding? What could go right? And how could either of these things impact your bottom line for your investment project?
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Some real estate investors run their project numbers for a best-case and worst-case scenario (I.e., 20% additional expense/20% additional income).
Finally, what is your real estate investment project exit plan? What is your OMG (oh, my gosh) exit plan (think Covid!)? What is your real estate investment project Plan B, and Plan C?
Working through these questions before talking with your real estate investment lender is important for understanding and protecting your real estate investment, but it tells your real estate funder that you have spent time on your project and your overall real estate investment game plan.
Having these metrics in hand when you approach a real estate investment lender, you can then work with your chosen lender to figure out how to make your numbers work and to solve any problems.
THE GOOD STUFF DOESN’T END HERE!
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Our free Quick Guide has the actionable advice, tips, and tools that you need to gain 100% confidence that you have done your homework, and that you are ready to call a lender to fund your next investment!
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i Fund Cities is an “alternative” lending platform offering custom real estate funding options for every level of investor, across a full range of lending products. As investors ourselves, we are just like you: hustle and grit, not suit and tie. We give you speed, transparency, knowledge, and a personalized investing partnership that you are just not going to find anywhere else.