Napkin Analysis
One of the biggest hurdles that kept preventing me from getting started with real estate was
procrastination. This procrastination was tied to my perceived dread of real estate analysis. It seemed
like this complex boring task, on par with doing taxes. But a blog post I stumbled into on BiggerPockets
in 2014 changed my perception of it. This post was by Ali Boone, a digital nomad who travels the world,
living off of her rental income and blogging about it.
The post was about the concept of a napkin analysis - a real estate analysis so simple that you could do it on a napkin in Starbucks. The idea is to spend less time analyzing deals, because your time is valuable. This napkin analysis isn't meant to be your only analysis, but more of a ballpark estimate of your net cash flow - with a decent safety margin. A deal that passes this analysis may be worth analyzing in more detail, a deal that doesn't should be discarded. This keeps your decision criteria objective and avoids emotional decisions or falling in love with a bad investment.
The idea is to quickly ballpark gross monthly income and then subtract gross monthly expenses from it. And while in theory this should be easy enough to do on a napkin, it's much easier with a spreadsheet, Redfin, and Rentometer. There are plenty of online property analysis calculators, but most I've found so far are over-engineered, and cumbersome. Instead, I recommend putting together your own (it will 30 mins or so, and you'll learn important real estate concepts in the process) or using the Napkin Analysis on our website.