Attend our live podcast TONIGHT, April 24, 8 PM eastern. Discover the Secrets to Scaling up to 100 Units or More and how to do that in 12 months or less. Go to https://stream.bigdealmike.com to register!

In my post yesterday, I revealed why you should not buy an apartment building based on the current NOI or based on actuals. This is the exact opposite of what the gurus teach and some of you here got confused and even irritated by this. Below are the steps to deciding the price to offer on an apartment building: Step 1: Calculate the PROFORMA value of the property based on YOUR ANALYSIS Notice I did not say, buy the property based on the PROFORMA value of the seller or broker. Doing so is foolish because you're buying someone's "dream scenario" - which can become a nightmare for you (LOL). Instead, do your market analysis to find the current market rent of the property. Then, based on how you can operate the apartment building - based on its age and location, you can decide the operating expense ratio (whether it's 50% or higher or lower). Based on that, you can estimate the proforma NOI (net operating income). Then based on the location, (and again, you have to do market research), you can estimate the location cap rate. The proforma value of the apartment building is then... Proforma NOI/ location cap rate. Step 2: Estimate the Investment Needed to Buy the Property This number is based on 2 things: 1. The downpayment you need to bring; and 2. The cost of renovation or capex Renovation can be included and 75% of that can be financed by the lender as well. Initially, I base my renovation estimate just on the photos of the exterior and the inside of the apartment units. After my LOI gets accepted is when I go out and estimate the renovation thoroughly. Step 3: Determine if the Investment Meets Your Metrics and If So, Submit an LOI (Letter of Intent) Based on the Investment required, now you can calculate 2 things: 1. the Cash on Cash return (CoC); and 2. the Equity Multiple (or Multiplier) or EM in short I want apartment buildings with a CoC of 6-8% per year average over a 5-yr time frame and an EM of 2.5x or higher. You decide what CoC and EM are right for you.

Don't forget TONIGHT (April 19) at 8 PM eastern, I will be doing a FREE Masterclass on How to Raise MILLIONS in Private Capital. Here's the Zoom link: https://us02web.zoom.us/j/83728875223 If you're attending, let me know by commenting below (or if you're reading this through email, email me back at [email protected]) and I will give you the INVESTOR MATH CALCULATOR, a spreadsheet that calculates the 4 Numbers that every investor looks for before they invest in your real estate deal. You should NOT miss this because there WILL BE NO REPLAY!!! See you all there!

Here's an actual hotel deal by one of my Mastermind members - Johannes Urpelainen. . $620,000 purchase price $200,000+ gross potential . I estimate that the Net operating income on that $200K+ gross is around $80,000/yr. . What about his cashflow? At 80% LTC (loan to cost) and 6.5% interest (I am assuming interest only), his debt service is... . 80% x $620,000 x 6.5% = $32,240 . Therefore his cashflow is: . Cashflow = NOI - debt service = $80,000 - $32,240 = $47,760 . At 20% downpayment ($124,000), that means, the cash on cash return on this hotel once it's stabilized is a whopping... . $47,760/ $124,000 = 38.5% cash on cash return! . In other words, Johannes would get his money back in just 2.6 years! Then everything after that is pure profit. . That beats the cash on cash return on my larger hotels. So don't underestimate small hotels for their yield can be MASSIVE. . How do you find hotel deals like these? . What about I give you 20+ sources of hotel deals? . How do you analyze hotels to determine which hotel is worth acquiring? . What about I give you our Hotel Analyzer and have one of my analysts analyze hotel deals with you so you don't get into a bad deal? . How do you finance hotels? . What if I give you the lender that can do this for you? . How do you operate a hotel? . What if I give you good hotel operators so you don't have to manage and operate the hotel yourself. . But how do I get the downpayment to buy hotels? . What if I show you 5 ways to buy a hotel with low or even no money down? . Or if I like your hotel, what if we partner on it? . All these and more will be discussed during the HOTEL Investing Masterclass tomorrow, Thursday, April 6. . . Comment below to get the Zoom link. It will be the last Hotel Investing Masterclass I am having...so do NOT miss it!

. . We did it by ASSUMING the existing mortgage on the property. The lender told our hotel operator that their borrower (and seller) was ready to walk away from the property. When we looked at the numbers and visited the hotel, we proposed to the lender that we will assume the underlying financing. . Normally with hotels (that is prior to Covid), one has to bring 30-35% downpayment and the lender will finance the rest. On an $8.3M purchase, we would need to bring as much as $2.9M to the closing table. . We reasoned with the lender that since hotels have gone down in value, in ADR and occupancy...it was hard to get new bank financing on it...and therefore, a mortgage assumption was the only way the deal would work. . The lender was so desperate they even agreed to waive the 1% assumption fee. And that was how we bought this hotel for NO MONEY DOWN.