Property Deal Analyser Explained:
A rare delve into the analytical brain of Mark Homer...
I say the analysis of the deal is the most important part, and this software has bought me over 350 properties in 5 years, so I could focus on my other spreadsheets"
With so much focus on property investors doing deals in this buyers market, we thought it was the perfect time to bring our collective experience together on one dynamic platform and launch the first of its kind, our property deal analyser.
Now, we knew the challenges investors faced when doing their due diligence ‘on the go’ - hard to crunch the numbers quickly and effectively, often losing the property deal to another investor, or paying too much...
This app allows investors to minimise mistakes, and systematically breaks down the buying process in logical and coherent fashion, providing the backbone of your property investing decision making process.
If you haven’t got it yet, you can get it free on the iPhone while we are making improvements ready for official launch:
I'll give you a quick run-down on a 3-bedroom property I’m looking to purchase to show you:
A. How the app works in real terms and
B. If the deal stacks for me...
I will purchase the property for around £70,000, with a quick simple cosmetic renovation of around £5000, which will give a post renovation valuation of £105,000.
The rent achievable figure of £550 will be the post renovation monthly rental expectation.
I also expect the property to be void for 4 weeks which needs to be accounted for from the cashflow hence the void box at the end.
Remember if the property is unmortgagable you may need to buy with cash/bridging/JV funds or with a light refurb product.
Further below, I have entered £100 into the yearly safety testing box which relates to the yearly gas safety check we all have to comply with and entered 10% into the management box which is the 10% + VAT which gets paid to the letting agent.If you choose to self manage (& want another JOB), keep this section blank - we wouldn’t advise this
|At Progressive we usually buy a property with a first mortgage without an early redemption penalty and then look to remortgage that property after 6 months to pull a significant portion of the purchasing funds back out. Hence the App will give you 2 mortgage sections (purchase & remortgage)
Firstly, enter the mortgage rate, here it is 6% which is available for a mortgage with no redemption penalties and enter a mortgage fee for the mortgage, here it is £1000 or if you have this as percentage of the loan, enter this in the “Mortgage fee rate” box.
Loan to value is the maximum p/c of the amount of the purchase price this lender will lend: in this case it is 75% & the rental coverage will need to be 125% of the monthly mortgage payments.
I have put the same information in for the second lender for the remortgage modifying the inputs to that lenders term...
You will see the second lender will usually have a lower interest rate (5.25%) in return for an early redemption penalty (a fee you have to pay if you redeem or pay the mortgage back early).
I have entered the ‘Mortgage fixed fee’ at £1969, no need to use the ‘£’ sign...
You will note that the Analyser has calculated that the minimum rent that the second lender will want to see is £431 to allow us to remortgage at the maximum amount [LTV] -easily achievable as it is £550 on a conservative amount, seeing as I don’t sleep anyway!
On the next screen we will need to add the legal costs to purchase the property which I usually estimate to be £1000 including disbursements and searches and the purchase valuation which for properties of this value are commonly £350 when a lender is involved.
Cash needed to pay mortgage figure will also be displayed which shows how much cash will need to be kept aside to cover the mortgage whilst the property has no tenants and therefore no rent flowing for 2.5 months...
It’s always good to have a buffer for unexpected costs for holding a property in this instance for every single one of your property purchases..
Now on the next section the total money to acquire tab is of particular interest. This figure represents the total needed to buy this property including deposit, legal fees and renovation costs.
It is data like this that makes the app so useful as you get that data out on the road and you know if you have enough cash to buy the deal or not.
I have put the legal fees for the remortgage at slightly less as there are no searches or disbursements.
Remortgage valuation costs are at £350 again. Interesting data such as the size of the new mortgage is also displayed.
Further down on the same screen you will come across the magic cash surplus figure.
This is the amount you need to leave in (a minus figure) or you can take out of the property at the remortgage stage (a plus figure if you have all of your "total to acquire" monies back out plus any cash back).. In this example, the cash we would need to leave in this deal is £3023. Buying a property for just over £3k is great leverage in my eyes...
This next page is the section for monthly cashflow.
You can see from the left hand screen the monthly costs for each variable item
Monthly rent (now & in 5 years)
Management (now & in 5 years)
Monthly mortgage payments (now & in 5 years)
Safety testing (now & in 5 years) is calculated by the analyser.
The monthly flow figure is the amount of net cashflow you could expect per month which is £60. The 5 year figure estimates rental income increasing at 5% per annum along with a 5% increase in costs except mortgage payment.
This property would be a buy for me.
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