This document provides an overview and guide for qualifying a buy and hold real estate investment. It begins with introductions of the authors and an explanation of how the guide could be useful. It then covers establishing a deal sorting funnel, rules of thumb for cash flow and expenses, and performing cash flow analyses both for the current period and over time. It also discusses analyzing appreciation potential, real estate financing options, and networking with other owners and agents. The guide aims to help readers establish a repeatable process for qualifying investment property deals.

2. Greg Toschi
CEO & Co-founder
Welcome to the Network

3. Fred Glick
VP of Real Estate Ops
Broker of Record
Qualifying a Buy and Hold Investment
Tucker Smith
Marketing Coordinator
“Everyday skills can yield
extraordinary returns.

4. - One of first four employees
- Editor: ‘Build with Onerent’ (Blog)
- Market Research
- Customer Research
Tucker Smith
Marketing Coordinator
Fred Glick
VP of Real Estate Ops
- Broker of Record for Onerent
- CEO of Arrivva
- Licensed Broker and Loan
officer for # years

5. How This Might be Useful to You
• If you inherited your property, and have never bought
one.
• Don’t go through what I did. Use this as a starting point and
road map.
• If you’re looking to become more efficient at qualifying
deals
• Your time becomes more valuable as your portfolio scales.
This gives you a process that you can tailor to fit your needs.
• If you haven’t taken a finance class in the last 10 years
• Everyone forgets math at some point. Even the most
seasoned investors might find, or rediscover a golden nugget.

6. Overview
Properties make money in 4 ways
1. Cashflow
2. Appreciation
Deal Funnel Process
Cashflow Analysis: In the Moment
Cashflow Analysis: Over Time
3. Asset Attainment
4. Tax Benefits

7. Deal Sorting Funnel
• Data overload
• MLS, Redfin, Zillow, Trulia,
Investing Events, etc.
• Time = Money
• The faster you close deals,
the longer your money has
to work for you
Lead sources

8. Rules of Thumb
Rent/Purchase Price
50% Rule
= 1.5%
“Most properties that are over X% in this market usually generate
positive cashflow”
States that at least half of your rental
income is likely to be allocated to non-
mortgage expenses (maintenance,
insurance, or property management)

9. Rules of Thumb cont.
Vacancy Turnover
• How long until I start getting paid? (Will I have to fix it up?)
• Judgement call
• Price, condition, lease terms, time of year, etc.
• Average vacancy reports

10. Cashflow Analysis: In the Moment
Annual Property Operating
Data (APOD)
• Can be thought of as a
property balance sheet
• Foundation for the rest of our
analysis
• Annual Net Operating Income
Calculations that give insights to a property at a specific point in time

11. Cashflow Analysis: In the Moment
Annual Expected Income
• Dictated by the market
• Compare properties of similar size, condition, location, and
amenities
• Mapliv.com
Vacancy Loss
• % of Annual Expected Income
• Lenders will want a figure
• Safe estimates: 5% in average markets, 2% in hot
Gross Operating Income
• Income generated by a property pre-operating expenses

12. Cashflow Analysis: In the Moment
Operating Expenses
• Expenses associated with operating a property
• Maintenance, utilities, and insurance
• Mortgage payments and depreciation expenses do not count
Gross Rent Multiplier (GRM)
• Used to estimate property operating expenses
• Similar investment properties à produce similar incomes à
sell for similar amount à similar operating expenses.

13. Cashflow Analysis: In the Moment
Property Value = $150,000
Annual Expected Income = $20,400
GRM = 7.5
• Your property is valued roughly 8 times higher than the yearly
income it produces
Perform on similar properties in the market. Compare
GRM’s to confirm that the prospective property’s asking
price is fair.
If the asking price is fair, then you can roughly equate
their operating expenses to what yours will be.

14. Cashflow Analysis: In the Moment
Net Operating Income (NOI)
• Cash produced by property if it
were paid off and tax exempt
• Used in a lot of calculations
Start your analysis by forming
an APOD
• Creates loose operating budget

15. Cashflow Analysis: In the Moment
Cap Rate
• Expresses relationship between NOI and
property’s market value
Market Value = Investment
Amount
NOI = Return on Investment
Cap Rate = Rate of Return
Expresses cap rate as a percentage
Check to see if asking price is fair
Target NOI based on desired Cap
Rate and Market Value
Relationship can be manipulated
to reveal a lot of info

16. Cashflow Analysis: In the Moment
Debt Coverage Ratio = 1.0
• You have exactly enough left to pay
the mortgage
Debt Coverage Ratio > 1.0
• Can pay mortgage + extra cashflow
Debt Coverage Ratio < 1.0
• Will have to pay some of mortgage
out of pocket
Debt Coverage Ratio
• Can I pay my bills?
• Shows how much money you have
available for Annual Debt Service w/
o losing money
• Remember 50% rule

17. Cashflow Analysis: In the Moment
Default Ratio
• Shows lenders how likely a property is to defaulting on mortgage loans
• Most want to see something below 80-85%, but it’s case-by-case depending
on the market conditions

18. Cashflow Analysis: Over Time
Time Value of Money
• A dollar today is worth more than a dollar tomorrow
• “Today dollars” have the potential to be invested and increase in
value
• Due to inflation, the dollar’s buying power decreases as time
passes

19. Cashflow Analysis: Over Time
Compound Interest
• Calculates interest for the next period of a loan
• Based on principal + previously accumulated interest

20. Cashflow Analysis: Over Time
If inflation was 10% between years 1 and 2, then you’d actually have…
Present Value of a Future
Cashflow
Tells you what your investment is
worth in today’s dollars
Year 1: Invest $100
Year 2: Money grew to $109 r = discount rate (expected decrease in buying power)
I made $9 right? Not
necessarily.

21. Cashflow Analysis: Over Time
Discounted Cashflow
• Sum of present value of all future
cashflows
• Calculated year by year with PV
equation
• Use excel template

22. Cashflow Analysis: Over Time
Net Present Value (NPV)
• Closely related to Profitability Index regarding the amount you pay
for future cashflows
• Am I going to reach my desired rate of return? (single property)

23. Profitability Index
• Also shows rate of return of a property
• Provides a ratio that makes it easy to compare multiple
properties
Cashflow Analysis: Over Time

24. Cashflow Analysis: Over Time
Property A
produces
higher returns
per dollar

25. Cashflow Analysis: Over Time
Which loan is better?
• Depends on how long you
keep the property, and how
much you save each year on
interest by taking the points
• Use excel template
Calculating a Mortgage
• Typically structured so that the
principal amount and interest
payments are paid monthly over
lifetime of loan
Calculating Points
• Prepaid interest on mortgage
loans
• 1 point = 1% of mortgage

26. Basics of Analyzing Appreciation
Network
• Agents
• Brokers
• Property Managers
• Other Investors
Basic Market Factors
• Job Growth – Does it rely on a single industry? How stable
is that industry?
• City expanding Infrastructure – “18-hour city”
• Average Rent
• Average Sale Price
• Average Vacancy Time

27. Links
Ebook + spreadsheet template
http://content.onerent.co/buyandholdguide
Building a Repeatable Model
http://content.onerent.co/buyandholdguide/part2
Tax Strategy Guide
http://content.onerent.co/buyandholdguide/part3
‘Build with Onerent’
http://blog.onerent.co

28. Rent vs Sell?
Greg Toschi
CEO & Co-Founder
“The Bay Area still shows strong trends
towards of a growing rental market.

29. Is The Bay Area Still On Top?
The San Francisco
Bay Area is still in
the top 5 fastest
growing markets

30. Is The Bay Area Still On Top?
Bay Area rent growth
is the strongest in the
nation.

31. Why Are We Still on Top?

32. Why Are We Still on Top?
Purchasing trends of Millennials

33. Why Are We Still on Top?

34. The Current State of Real Estate Financing
“Hack your way into a
better mortgage rate today.
Fred Glick
VP of Real Estate Ops
Broker of Record

35. The Standard Mortgage
Types of real estate financing:
1. Primary residence
2. Secondary residence (vacation)
3. Investing

36. The Standard Mortgage: Qualifications
How to get pre-approved
1. Property
2. Personal income and property income
3. Assets including reserves
4. Credit

37. The Standard Mortgage
Fannie Mae and Freddie Mac
(1-4 unit residential financing)
Maximum
Mortgage
$625,500 $800,775 $967,950 $1,202,925
Units 1 2 3 4
Max Loan to
Value
85 80 75 75
Down payment 15% 20% 25% 25%
Specific for Bay Area homes

38. Non Standard Mortgages
Available Programs
- Stated income
- Non warrantable condos
- Low credit score
- Over 4 units
Income calculations:
- Debt service coverage
- Recourse or non recourse financing
- Interest only
- Terms

39. Non Standard Mortgages
Income calculations:
- Debt service coverage
- Recourse or non recourse financing
- Interest only
- Terms

40. Hacking Your Mortgage, Legally!
How to buy a 1 or 2 unit property with 3.5% down payment
• The “kiddy condo”
• Use your relatives
• No income, or assets needed
Seller financing
• Pay less for your down payment
• Befriend your lender

41. Hacking Your Mortgage, Legally!
Free tax deductions from your seller
• Negotiate hard
• Get tax deductions for “points”

42. Owner & agent network

43. Owner & agent network
Rick Trevino Don Sung
Intero Real Estate Colliers International

44. How we can help you